The US Federal Reserve is continuing its series of interest rate hikes despite the latest bank quake. It raised the key rate by a quarter of a percentage point to the new range of 4.75 to 5.0 percent on Wednesday. The problems of regional banks in the USA, such as the Californian SVB, which has slipped into bankruptcy, recently gave rise to speculation that the Fed might now pause following around a year of interest rate hikes.
Because the difficulties of the financial institutions are also considered to be a result of the rapidly increasing interest rates to combat inflation. Despite a decline to 6.0 percent, it was still well above the Fed’s target of 2.0 percent. The currency watchdogs have now signaled that they want to continue to defy the upward trend in prices.
In their updated projections, the monetary watchdogs are now estimating an average interest rate level of 5.1 percent for the end of the year – just as they had already targeted in December.
The problems at several financial institutions in connection with rising interest rates had recently fueled expectations that the Fed might make smaller rate hikes in its fight once morest inflation in the future in order to prevent a broader crisis. However, some analysts saw this scenario as unrealistic before the decision: “To solve the banking problem, you would really have to go back to very low interest rates, and I don’t think that will happen,” said Paul Nolte, portfolio manager at wealth manager Kingsview in Chicago.
