The Federal Reserve On Wednesday announced a one-quarter of a percentage point increase in its benchmark interest rate basis-point interest-rate increase, the tenth consecutive hike that has brought the overnight borrowing rate from near zero to above five percent.
The Fed raised its target range for federal funds to between five percent and 5.25 percent, the highest since 2007. Most Fed watchers expect this will be the final hike as the Fed pauses to assess the impact of monetary tightening.
Turmoil in regional bank stocks following the failure of First Republic Bank added some uncertainty to the Fed’s move this week. On Wednesday, however, the market was noticeably calmer as investors awaited the Fedx announcement.
Fed officials have said they plan to keep their target elevated for several months to come. The market, however, currently reflects expectations that the Fed will cut rates in the second half of this year. Many economists believe the economy will slip into a recession in the third or fourth quarter of this year.
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