Federal Reserve raises interest rates to a 16-year high

The Federal Reserve has hiked interest rates for the 10th time in just over a year but reversed past statements about future increases.

The 0.25 percent rise in the federal funds rate brings the current rate to 5.25 percent – a 16-year record high.

Fed Chair Jerome Powell said: “People did talk about pausing, but not so much at this meeting. We feel like we’re getting closer or maybe even there.”

He indicated the central bank is now looking for signs of stronger-than-expected growth, hiring, and inflation to continue raising rates.

This is a departure from the Fed’s previous stance – to wait for clear signs of a slowdown before ending rate increases.

However, the Fed’s decision was complicated by the ongoing repercussions of this spring’s banking crisis.

It has made banks more reluctant to loan money and curbed demand in a way that mimics an interest rate hike.

To address these concerns, policymakers debated whether the May hike gets interest rates high enough to pause the Fed’s aggressive campaign against inflation.

They also discussed if the hike would give time for their policies to work through the economy or if they have more work to do to raise borrowing costs.

Additionally, they discussed curbing demand for all kinds of investments, from mortgages to car loans to business hiring.

The Fed’s decision to raise rates and signal a potential pause comes as the economy continues to show strength.

The unemployment rate is at a 50-year low, and GDP growth has remained above 2 percent for the past year.

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However, inflation has been a concern, with prices rising above the Fed’s 2 percent target.

The central bank’s decision to raise rates is meant to help rein in inflation, but it also has the potential to slow economic growth.

The Fed’s next meeting is scheduled for June 13-14, and policymakers will continue to monitor economic data to determine whether further rate hikes are necessary.

In the meantime, the central bank must wait to see if its policies can successfully tame inflation and slow the economy or if policymakers have already gone too far.

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