The US Federal Reserve raises interest rates by 0.25% because more would not be “adequate”

before a banking crisis and still high inflation, the United States Federal Reserve has chosen to raise interest rates by 0.25%, up to 5%.

The increase has been less than half a percentage point that some analysts expected and the president of the Fed, Jerome Powell, has hinted that the months of consecutive increases could be coming to an end.

The President of the United States Federal Reserve (Fed), Jerome Powell, anticipated this Wednesday that, as a consequence of the recent banking crisis, increases in interest rates may not be adequate to contain inflation.

“Instead, we now anticipate that some additional policy firmness may be appropriate,” Powell said. Asked about the difference between a future rate hike and a policy tightening, Powell indicated that the focus should be on the word “power” as opposed to the rate hikes that have so far been “ongoing” in the central bank.

He also sought to reassure markets about US financial institutions following the recent troubles in the country’s banks, saying the US banking system is “robust and resilient” and is backed by strong capital and liquidity.

He added that “it is too early to determine the extent of these effects and therefore too early to say how monetary policy should respond.”

He central bank president made it clear that they will closely monitor the available data and the real effects of tighter credit conditions on economic activity, the labor market and inflation when making new decisions.

On the other hand, he was of the opinion that the Fed it needs to “strengthen supervision and regulation” of the banking system.

“At a basic level, the management of Silicon Valley Bank failed miserably,” Powell said, noting that “supervisors saw the risks and stepped in” and were only interested in identifying what went wrong.

He also stressed that the Fed remains “committed” to achieving a drop in the inflation up to the 2% target.

In this sense, he explained that reducing inflation will require a period of growth “below the trend” and a moderation of labor market conditions: “Restoring price stability is essential to pave the way to achieve maximum employment and long-term stable prices,” he warned.

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