Fed raises interest rate by 0.25 point to combat inflation amid banking fear
The Federal Reserve has increased its interest rate by 0.25 points in an effort to combat inflation.
WASHINGTON (TechtUSA) - On Wednesday, the Federal Reserve increased its short-term borrowing rate by 0.25%, in an effort to further combat inflation, despite fears that previous rate hikes contributed to the banking crisis in the United States.
The benchmark interest rate set by the Fed has played a role in the financial emergency currently faced by U.S. banks. Despite a significant decrease in inflation from its summer peak, it still remains more than triple the Fed's target of 2%.
The sudden and steep increase in interest rates had a negative impact on the value of bonds held by Silicon Valley Bank (SVB), ultimately leading to the bank's failure and causing ripple effects throughout the financial sector.
The Federal Reserve issued a statement dismissing any worries regarding the state of the financial system. "The U.S. banking system is sound and resilient," Fed added.
The Federal Reserve indicated that they may consider additional rate increases in the future, but did not make any firm commitments at this time. "Additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time." central bank stated.
