On May 3, the Federal Reserve increased interest rates for the tenth time in 14 months but withdrew from its earlier predictions of additional rate hikes, a report from The Washington Post released on MSN.com said. The central bank's benchmark interest rate is now between 5% and 5.25%, the highest level it has been in 16 years.
The Fed's announcement made no mention of earlier statements suggesting that additional interest rates hikes could be coming, which could mean that there may be a pause in rate increases for now. Policymakers argued whether this latest interest rate hike along with other Fed policies will be enough to curb rising rates of inflation or if more action is needed to raise borrowing costs and reduce demand for all types of investments, including auto loans, mortgages, and business hiring.
Fed Chairman Jerome H. Powell was optimistic that these actions could help the economy avoid the mild recession predicted to take place later this year, noting that despite the Fed's aggressive interest rate hikes, unemployment has remained low.
“We’ve raised rates by 5 percentage points in 14 months and the unemployment rate is 3.5 percent — pretty much where it was, even lower than it was when we started,” he said, according to The Post. “It wasn’t supposed to be possible for job openings to decline by as much as they’ve declined with our unemployment going up. Well, that’s what we’ve seen.”
But Powell did not completely rule out the possibility of an economic slump.
“It’s possible that we will have what I hope would be a mild recession,” he said.
The continued ripples from the failures of Silicon Valley Bank and Signature Bank this spring have complicated the Fed’s decision-making. Officials have said that the collapse of those banks has made banks less willing to make loans, which has reduced demand similarly to an increase in interest rates.
