Fed Raises Interest Rates by 0.25% as Expected, Reaching Highest Level in 16 Years

On May 4, 2023, the US Federal Reserve announced its 10th interest rate hike in 14 months, raising rates by another 0.25% to 5-5.25%, reaching the highest level in 16 years, as anticipated. 

Ref: Fed rate decision May 2023: Fed increases rates a quarter point and signals a potential pause (cnbc.com) 

Fed Chair Jerome Powell has consistently emphasized the importance of prioritizing inflation reduction, which has surged to its highest level in 40 years following the COVID-19 pandemic. In a recent statement, Powell confirmed that the banking system remains "resilient and flexible."

"The tighter lending conditions for households and businesses could potentially impact economic activity, employment, and inflation, although the scope of these effects remains uncertain. The committee remains highly attentive to inflation risks," Powell said.

Powell also hinted that the end of interest rate hikes may be near, stating, "We feel that we're much closer to the end than the beginning, but the course of policy will depend on the outlook."

"The committee remains strongly committed to achieving its 2% inflation target," Powell added.