Financial Markets: Federal Reserve Meeting Research Brief
Softer Rate Hike Outlook Potentially
Clears Some Hurdles for Investors
Banking shock prompts Fed to take a more measured approach. At its March 22 meeting, the Federal Open Market Committee raised the federal funds rate for the ninth time in 12 months. The 25-basis-point hike matches the margin from February and lifts the lending rate’s lower bound to 4.75 percent. The FOMC cited still-too-high inflation and a persistently tight labor market as reasons for necessitating the increase, which is nevertheless below what was anticipated by the market just a few weeks prior. The recent seizures of Silicon Valley Bank and Signature Bank, while due to unique challenges and quickly contained by regulators, have prompted more caution around the banking sector. The resulting tightening to credit conditions is likely to complement the Federal Reserve’s goal of reducing inflation and softening employment, allowing for a smaller policy rate adjustment.