UNITED STATES NEWS

Bank turmoil led Fed officials to forecast fewer rate hikes

Apr 12, 2023, 11:10 AM

WASHINGTON (AP) — Turmoil in the banking system after two major banks collapsed led many Federal Reserve officials to envision fewer rate increases this year out of concern that banks will reduce their lending and weaken the economy.

The uncertainty stemming from the banking sector also helped Fed officials coalesce around their decision to raise their benchmark rate by just a quarter-point, rather than a larger hike, despite signs that inflation was still running too high, according to minutes of the Fed’s March 22-23 meeting.

Overall, the minutes showed that the banking troubles inserted enormous uncertainty into the Fed’s decision, and reversed an emerging trend to raise rates even higher to quell inflation.

Before the collapse of Silicon Valley Bank, many officials said they had expected to forecast more than just one additional hike this year because strong economic and inflation data showed that the Fed still had more to do to control the pace of price increases. Instead, Fed officials agreed that the collapse of the two large banks “would likely lead to some weakening of credit conditions,” as banks sought to preserve capital by pulling back on lending to consumers and businesses.

But they also stressed that it was too soon to know how much a cutback in lending could affect the economy. According to the minutes, the tumult in the banking industry “further increases the already-high level of uncertainty” surrounding the economy and job market, the 18 Fed policymakers agreed.

Several officials said they had considered supporting leaving rates unchanged at the March meeting, because of the uncertainty stemming from the banking problems. But they added that actions by the Fed, Treasury Department and Federal Deposit Insurance Corp. had “helped calm conditions” in banking and reduced the risks to the economy in the short run.

Some other officials said they had favored a half-point hike last month because hiring, consumer spending, and inflation data still pointed to a hot economy. But given the uncertainty resulting from the banking troubles, they “judged it prudent” to implement a smaller quarter-point increase.

United States News

Republican presidential candidate former President Donald Trump hugs and kisses the American flag a...

Associated Press

Trump calls himself a ‘proud political dissident’ in CPAC speech

In a CPAC speech, Trump painted an apocalyptic vision of the future if President Joe Biden wins again as the two prepare for a rematch.

57 minutes ago

Republican presidential candidate former President Donald Trump gestures to the audience after spea...

Associated Press

Donald Trump wins South Carolina GOP primary, beating Nikki Haley in her home state

Trump has now swept every contest that counted for Republican delegates, with wins already in Iowa, New Hampshire and Nevada.

2 hours ago

Associated Press

Why AP called South Carolina for Trump: Race call explained

WASHINGTON (AP) — The Associated Press declared Donald Trump the winner of the South Carolina primary as soon as polls closed on Saturday. The race call was based on a comprehensive survey of South Carolina Republican primary voters that showed him defeating Nikki Haley by wide margins in her home state. Declaring a winner as […]

2 hours ago

Associated Press

Former NFL player Richard Sherman arrested on suspicion of DUI, authorities in Washington state say

SEATTLE (AP) — Former NFL player Richard Sherman was arrested early Saturday on suspicion of driving under the influence, according to the Washington State Patrol. No other details about the arrest were immediately available, said Trooper Rick Johnson, a patrol spokesperson. A spokesperson for the King County Prosecutor’s Office said nothing had been sent to […]

2 hours ago

Associated Press

Lithium ion battery caused fatal fire in New York City apartment building, officials say

NEW YORK (AP) — A lithium ion battery sparked a fire that killed one person and injured 17 others at a New York City apartment building, fire officials said Saturday. Friday’s two-alarm fire began just after 2 p.m. on the third floor of a six-story building in Harlem. New York Police Department video shows firefighters […]

3 hours ago

Associated Press

Federal prosecutors accuse a New Mexico woman of fraud in oil and gas royalty case

ALBUQUERQUE, N.M. (AP) — A New Mexico businesswoman is accused of defrauding the U.S. government and two Native American tribes of taxes and royalties due to them for oil and gas that her companies extracted from leased federal and tribal lands. Federal prosecutors announced this week that Teresa McCown recently was indicted by a grand […]

4 hours ago

Sponsored Articles

...

Day & Night Air Conditioning, Heating and Plumbing

Day & Night is looking for the oldest AC in the Valley

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.

...

Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.

...

Sanderson Ford

The best ways to honor our heroes on Veterans Day and give back to the community

Veterans Day is fast approaching and there's no better way to support our veterans than to donate to the Military Assistance Mission.

Bank turmoil led Fed officials to forecast fewer rate hikes