Fed Raises Key Interest Rate by 0.25%, Cautions Recent Developments Could Weigh on Economy

The Federal Reserve has raised its key interest rate by 0.25%, continuing its campaign against inflation. In a statement Wednesday, the Fed’s rate-setting committee noted that the U.S. banking system is sound and resilient, but warned that recent developments, likely referring to the market turmoil following several historic bank collapses, could weigh on economic activity, hiring, and inflation.

The rate hike marks the ninth consecutive increase since the Fed began its campaign against inflation in December 2015. The Fed’s goal is to keep inflation at a rate of 2%, and the rate hike is intended to help achieve that goal.

The rate hike is likely to have a mixed effect on the economy. On the one hand, it could help to keep inflation in check, which is beneficial for the economy in the long run. On the other hand, it could make it more difficult for households and businesses to access credit, which could weigh on economic activity.

The Fed’s rate-setting committee noted that the U.S. banking system is sound and resilient, but cautioned that recent developments could have a negative effect on the economy. The committee also noted that banks’ newfound caution could lead to tighter credit conditions for households and businesses.

The Fed’s rate hike is likely to continue to have a mixed effect on the economy. While it could help to keep inflation in check, it could also make it more difficult for households and businesses to access credit, which could weigh on economic activity.