At the most recent Federal Open Market Committee (FOMC) meeting in March 2023, the Fed raised rates again by a quarter of a percentage point, bringing rates from 4.75% to 5%.
The U.S. Federal Reserve raised interest rates seven times in 2022 and again in February 2023 in an effort to control inflation
It is uncertain whether the interest rate will continue to increase at the May 3, 2023, FOMC meeting, but Fed forecasts show that another rate hike is possible for 2023.
However, Federal Reserve Chair Jerome Powell has emphasized that they “may” hike rates one more time, suggesting that the increase might not happen. Bank failures earlier this year could drive a decision to keep rates stable at the May meeting, just as it drove the decision to raise rates by only a quarter percentage point in March.
The Fed recognizes the danger of additional bank failures but is also watching inflation, which is currently at roughly 6%
The goal is to return inflation to 2%, but that will put additional strain on the U.S. banking system. Powell continues to seek a “soft landing” for the economy, and experts believe that bank failures, tighter credit conditions, and the cooling housing market could lead to a pause in interest rate hikes.
Although the Fed previously pointed to ongoing increases, that thought process seems to have shifted as the Fed now has more factors to consider, including the stability of the banking system, tighter credit conditions, and a looming recession. The Fed could begin cutting rates as soon as the FOMC meeting in July if the next hike plunges the U.S. into a recession.
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