U.S. Federal Reserve Raises Policy Rate 25 bps to 4.75%-5% Target Range

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By Ketki Saxena 

Investing.com -- The US Federal Reserve has raised its benchmark policy rates 25 basis points to a 4.75%-5% target range. 

A press release accompanying the release of the announcement noted, “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.” 

“In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” 

The Fed will also continue with its program of quantitative tightening, continuing to reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.

The relatively muted move was in line with analyst expectations, coming as it did amidst a banking crisis threatening the stability of financial markets, and criticism that the crisis was triggered by over-aggressive policy tightening from the Fed. 

Referring to the banking turmoil, the press release accompanying the statement noted, “The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”