Key points to remember
- The Federal Reserve raised rates by 0.25%
- Federal interest rates are now in a range between 4.75% and 5%.
- The Fed’s decision comes shortly after the second-largest bank failure in US history.
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Despite the implosion of the Silicon Valley Bank, the Federal Reserve has chosen to continue to tighten monetary conditions in the United States.
Range 4.75% to 5%
The Federal Reserve continues its fight against inflation.
The US central bank announced today at the Federal Open Market Committee that it will raise federal interest rates by 25 basis points, bringing them to a range of 4.75% to 5%.
After being criticized for not taking inflation fears seriously, the Fed began aggressively raising federal interest rates in March 2022. In doing so, the central bank raised the cost of borrowing, which strengthened the value of the US dollar. The Fed initially raised rates at a rapid pace — making multiple 75 basis point increases in quick succession — throughout 2022, but slowed by the end of the year, only raising rates. than 50 basis points in December and 25 basis points in February 2023 .
Nonetheless, according to the latest CPI figures, inflation is still at 6% year-on-year, well above Federal Reserve Chairman Jerome Powell’s oft-stated 2% target. Powell noted March 7 that the central bank was therefore considering a resumption of aggressive rate hikes.
However, the Silicon Valley Bank collapse (and the distress of other regional banks) raised concerns about the resilience of the US banking sector in a high interest rate environment, as the Federal Reserve was forced to step in and ensure the integrity of depositors .
Disclosure: At the time of writing this article, the author of this article owned BTC, ETH, and several other crypto assets.