The US Federal Reserve (Fed) raised its forecasts. additional rate increases for this year after financial instability It was released after Silicon Valley Bank (SVB) and Signature Bank went bankrupt, according to the minutes of the last monetary policy meeting held on March 21 and 22.
“Potential effects Recent developments in the banking sector have contributed to economic activity and inflation led most of the participants “The Fed is trying to lower its expectations for the target rate range that will be restrictive enough,” he said.
However, the Federal Open Market Committee (FOMC) also agreed: Inflation continues at ‘high’ levels and “recent data shows little sign of starting to loosen fast enough to return to the 2% target when the time comes.”
In this respect, The latest February reading of the US Personal Consumption Spending Price Index, The statistic chosen by the Fed to monitor inflation came in at 5% on an annual basis. The Federal Reserve expects the underlying index to be 2.8% and 3.5% for this year.
In addition, the participants expressed Concerns about the sudden interruption of credit flow to households and Companies that have further slowed the economy as a result of the turbulence created by the SVB. However, members agreed that the extent of these effects was “uncertain.”
“Some of the participants It is necessary to be flexible and open when distinguishing which monetary policy is appropriate in the face of uncertain economic prospects.“, they stated in reference to interest rates.
Despite this, the committee agreed “Additional steps may be necessary to achieve a sufficiently restrictive monetary policy to reduce inflation to 2 percent.”
Finally, The Fed has included a recovery in 2024 and 2025 as well as the possibility of a recession this year. However, the economic growth of 2024 will be below the potential GDP ratio, while that of the next year will already be above it.
last raise
on March 22 The Fed has already decided to approve a 25 basis point rate hike, Until you place it within a target range of 4.75% to 5%.
The US monetary authority later estimated that further rate hikes would still be necessary. double the price and bring inflation to about 2%. In addition, the Fed noted that “the United States’ banking system is robust and resilient.”