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FOMC opts to hike rates following bank failures
The Federal Open Market Committee (FOMC) concluded its March meeting yesterday, where the committee raised rates 25 basis points to a range of 4.75 to 5 percent – the ninth consecutive meeting ending with a hike. “The FOMC opted for a hike despite recent turmoil in the banking sector,” said NAFCU Chief Economist and Vice President of Research Curt Long after the meeting. “However, the committee did not raise its projected terminal fed funds rate and softened the tone of the statement regarding the likelihood of future rate hikes.”
The FOMC’s statement anticipates “some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent overtime,” indicating potential changes to their monetary policy stance in the near-term.
The statement also reiterated the soundness of the U.S. banking system following the recent Silicon Valley Bank and Signature Bank failures. The FOMC did, however, note that "recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity."
“With so much pre-meeting speculation around the decision to hike versus stand pat, the committee essentially split the difference,” added Long. “Regardless of any further turbulence among small and regional banks, credit unions will remain a safe and reliable option for Main Street.”
More insights can be found in the new Macro Data Flash report. The FOMC will next meet May 2-3.