Fed Raises Key Interest Rate by a Quarter-Point

Central bank keeps rise relatively modest amid banking turmoil
By Rob Quinn,  Newser Staff
Posted Mar 22, 2023 1:17 PM CDT
Fed Raises Key Interest Rate by a Quarter-Point
Federal Reserve Board Chair Jerome Powell walks from the podium after speaking at a news conference at the Federal Reserve, Wednesday, March 22, 2023, in Washington.   (AP Photo/Alex Brandon)

The Federal Reserve has hiked its benchmark interest rate for the ninth time in a row, sticking to a quarter-point hike in a widely expected move, though banking turmoil added some uncertainty. Jason Furman, chairman of the Council of Economic Advisers during the Obama administration, told CNN earlier Wednesday that he expected a rise of 25 basis points, but with inflation stubbornly high, it would have been "an open and shut case" for a half-point hike without recent bank collapses. A quarter point, he said, was “enough to show they were serious on inflation." Last month, the Fed also hiked rates by a relatively modest quarter point, down from earlier half-point and three-quarter-point rises.

The move, which brings the base policy rate to between 4.75 and 5%, comes amid worries that rate hikes are destabilizing the banking system, the Washington Post reports. "There is risk for the Fed here," says Fed expert Tim Duy, chief economist at SGH Macro Advisors. "If the Fed hikes, it must be reasonably confident that regulators have ringfenced the banking problems. If the Fed hikes rates and bank failures multiply, the political fallout will be intense." (More Federal Reserve stories.)

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