Fed softens stance on inflation control

Interest rates

Federal Reserve Chairman Jerome Powell on Wednesday announced another quarter-point hike of the Fed’s key interest rate, the latest in a streak of 10 rate hikes meant to control inflation.

But the Fed also softened its language regarding future interest rate hikes, saying in a statement that it would consider a range of factors in deciding whether it needed to raise interest rates again. In its last statement, it had said that it anticipated raising interest rates again.

Why is the Fed possibly easing up on interest rate hikes? Wednesday’s rate hike comes after three major U.S. banks have collapsed in the last two months, in part due to holding long-term bonds that paid lower interest rates.

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It also comes as inflation remains persistently above the Fed’s target range.

Meanwhile, the U.S. government is nearing its borrowing limit. Economists such as Mark Zandi of Moody’s Analytics have warned that if the United States collides with its $31.4 trillion debt ceiling, it could harm the economy.

This story originally appeared in WORLD. © 2023, reprinted with permission. All rights reserved.

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