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Federal Reserve prepares to raise interest rates amid banking crisis


The Federal Reserve will announce its latest monetary policy decision at 2:00 p.m. ET on Wednesday, with investors expecting the central bank to raise interest rates by 0.25% in the coming weeks. second meeting in a row. A quarter point increase would take the policy rate to a new range of 4.75%-5%, the highest level since October 2007.

This notice will be given at the end one of the most uncertain central bank meetings in years as the Fed sought to balance inflation that remained above target and the banking crisis rocked the financial sector.

Data from CME team on Wednesday shows investors are betting almost 90% on the Fed raising rates by 25 basis points on Wednesday.

All eyes will be on Fed Chairman Jerome Powell’s press conference, which begins at 2:30 p.m. ET, to find out if recent banking failures are shaping the central bank’s approach to policy. How the Fed chair tries to tackle the financial system’s strained challenge with inflation that remains stubbornly high.

Since the beginning of March, three banks in the United States have gone bankrupt, including two — Silicon Valley Bank and Silicon Valley Bank. signature bank – be included in the right of reception by regulatory authorities. In Europe, the Swiss government is also required to Urgent merger between UBS and Credit Suissewith UBS replacing its smaller rival to stabilize the European banking system.

In response to these developments, the Fed established an emergency lending facility to consolidate deposits in the U.S. banking system and established swap lines with international central banks to ease global tensions that have arisen in recent weeks.

On the inflation side, Consumer price index in February showed that so-called “core” inflation, which excludes food and energy costs, rose 0.5% month-on-month and 5.5% year-over-year. On a headline basis, which includes food and energy, inflation rose 6% year over year in February, triple the Fed’s 2% target.

U.S. Federal Reserve Chairman Jerome Powell speaks to reporters after the Fed raised its target interest rate by a quarter percentage point, during a press conference at the Federal Reserve Building in Washington, U.S. , February 1, 2023. REUTERS/Jonathan Ernst

U.S. Federal Reserve Chairman Jerome Powell speaks to reporters after the Fed raised its target interest rate by a quarter percentage point, during a press conference at the Federal Reserve Building in Washington, U.S. , February 1, 2023. REUTERS/Jonathan Ernst

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