Fed, which has been raising interest rates, signals a 'break' in June

The US Federal Reserve raised its policy rate by 25 basis points, as expected. The bank signaled that the fastest tightening cycle in history was paused. The phrase indicating further interest rate hikes in the future was removed from the decision text. Chairman Jerome Powell stated that they will continue to make decisions based on data. The US Federal Reserve announced its interest rate decision under the shadow of the banking confidence crisis and inflation dilemma. The Fed raised its policy rate by 25 basis points to a range of 5 - 5.25 percent. This was the 10th interest rate hike since March 2022. The decision was taken unanimously. A 25 basis point interest rate hike was also expected in the markets. Thus, the interest rate rose to its highest level since August 2007. The bank signaled that the end of interest rate hikes may have come. The statement included the statement, “The Committee will closely monitor the effects of monetary policy with the information received.” The phrase “additional tightening,” indicating further interest rate hikes in the future, was removed from the text. It was emphasized that inflation risks were being monitored very carefully, and “inflation remained high. Economic activity grew moderately in the first quarter.” The statement was used. Regarding the recent banking crisis, it was stated that the banking system is solid and resilient and that “Tightening credit conditions for households and businesses are likely to put pressure on economic activity, hiring and inflation.” It was stated that cumulative tightening and the lagging effects of monetary policy on the economy will be taken into account when determining the dose of policy tightening in the coming period. It was stated that the pace of balance sheet contraction will continue as announced. The Fed, which started raising interest rates in March 2022, continued on its way with a 25 basis point increase by slowing down the rate of interest rate increases in the last 3 meetings. Powell: We will be data-focused Chairman Jerome Powell stood in front of the cameras at the press conference after the decision. In his speech, Powell said that they will continue to follow the data and take the necessary steps and tighten monetary policy even more if necessary. Stating that inflation is still above the target, Powell said, “Inflation has slowed since the middle of last year but remains high. We are determined to return inflation to the target, we have a long road ahead of us.” Powell said the Fed’s inflation outlook did not support a rate cut. The chairman noted that the banking sector was resilient and had improved since early March, but that industry oversight and regulation needed to be strengthened. He said JPMorgan’s purchase of First Republic Bank was a “good decision,” adding, “The sale of the bank is an important step toward ending the tension in the sector.” Regarding the debt ceiling, he said, “it is important that the debt ceiling is raised in a timely manner. The economic consequences of not reaching an agreement on this issue are extremely uncertain.” Powell also said that it is possible to avoid a recession.