The Federal Reserve reinforced its fight against high inflation by raising its key interest rate by a quarter-point to the highest level in 16 years. But the Fed also signaled that it may now pause its streak of 10 rate hikes.
high inflation
Speaking at a news conference, Chair Jerome Powell said the Fed has yet to decide whether to suspend its rate hikes. But he pointed to the change in the statement's language as confirming at least that possibility. Powell said the Fed would continue to monitor the latest economic data in deciding whether to pause its hikes.
"Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go," Powell said.and turmoil in the banking industry. All three failed banks had bought long-term bonds that paid low rates and then rapidly lost value as the Fed sent rates higher. Fed economists have estimated that tighter credit resulting from the bank failures will contribute to a "mild recession" later this year, thereby raising the pressure on the central bank to suspend its rate hikes.
The turmoil in the nation's banking sector, which re-erupted last weekend as regulators seized and sold off First Republic Bank, has intensified the pressure on the economy. It was the second-largest U.S. bank failure ever and the third major banking collapse in the past six weeks. Investors have grown anxious about whether other regional banks may suffer from similar problems.
Consumer prices rose 7% in the 20 countries that use the euro currency in April from a year earlier, up from a 6.9% year-over-year increase in March.
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