NEW: The Federal Reserve raised its target interest rate a quarter-percentage point Wednesday while acknowledging that problems in the banking system triggered by its previous rate increases are likely to weigh on the economy.
The Federal Reserve building in Washington, DC. Photo: Samuel Corum/Bloomberg via Getty Images
It is betting that other tools, like emergency lending and deposit guarantees, will contain damage among U.S. banks and prevent a steep economic slowdown.Following a two-day meeting, the policy-setting Federal Open Market Committee raised its federal funds rate target to a range of 4.75% to 5%, the highest it has been since 2007.
Notably, none of the officials forecast rate cuts between now and year-end, contrary to the expected moves priced into financial markets that have become more gloomy about the outlook over the last two weeks.In their policy statement, the officials did signal more flexibility on what further rate moves might occur, saying that "some additional policy firming maybe appropriate."
However, shortly after that testimony, Silicon Valley Bank was seized by regulators, followed shortly by Signature Bank, prompting fears of a broad run on regional banks across the United States.
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