The Federal Reserve raises the interest rate to 5%

On Wednesday, the US Central Bank chose a moderate increase in its rate, by a quarter of a percentage point, as expected, still concerned about inflation, and despite the turmoil in the banking sector affecting the economy.

The decision was taken unanimously. The Fed’s key policy rate is now in a range of 4.75 to 5.00%, the highest level since 2006, and the institution plans further hikes. The Fed expects inflation this year to be slightly higher than it forecast in December, at 3.6% versus 3.5%, but GDP growth is slightly weaker, at 0.4% versus 0.5%.

The Federal Reserve warned, after its meeting, that the recent banking crisis “is likely (…) to affect economic activity, employment and inflation,” stressing that “the magnitude of these effects is uncertain.

The powerful institution, which raised its rate by a quarter of a percentage point on Wednesday, also confirmed in a press release that “the US banking system is strong and resilient,” and that its Monetary Policy Committee “remains vigilant about inflation risks.”

A statement from the bank and economic expectations from officials point to the end of rate hikes approaching.

The Fed expects inflation to be slightly stronger than expected for 2023, at 3.6% versus 3.5% (press release), but adds that banking turmoil is “likely” to impact the economy, employment and the economy.