On March 22, the Fed assured markets harmed by the banking crisis that it has enough firepower to prevent a spread. However, it did not lower its guard against persistently high inflation.
Outline
The Fed expanded its support target rate to a scope of 4.75 5%, a level last seen preceding the 2007-08 worldwide monetary emergency.
The rate increase, broadly in line with expectations, will raise borrowing costs even more and increase the likelihood of a global recession with ripple effects in the world’s largest economy and elsewhere. The rate hike was necessary due to persistently high inflation.
The Federal Reserve observed in its statement the banking system in the United States is quite sound and resilient. Â Recent developments in the sector resulted in tighter credit conditions for households and businesses and weighed high on economic activity, hiring, and inflation.
End Note
The Federal Reserve reiterated that the broader banking sector is strengthened by adequate safeguards in terms of capital adequacy and assured the markets that it has sufficient firepower to handle the banking crisis.
Global central banks, led by the Fed, announced a dollar swap facility following the Credit Suisse disaster to ensure sufficient system liquidity.
Despite the banking sector crisis, the US Federal Reserve pikes up the rate of interest by a quarter point to combat inflation
