Fed Softens Tone on Rate Hikes after a Quarter Point Increase

The U.S. Federal Reserve came to a resolution on Wednesday to increase its interest rate by a quarter percentage point while expressing caution about the recent crisis in its banking system and signaling that its rate-hike cycle is close to an end.

It was the ninth hike for the Fed since March 2022, but unlike any other hikes, the statement from the central bank after the decision is somewhat dovish, something that investors have not seen for a year.

“The Committee will closely monitor incoming information and assess the implications for monetary policy,” said the central bank in a post-meeting statement. “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

The wording and tone of the Fed’s chairman was seen by investors as different from before when he used to stick with bringing stability to the economy by using any tools he deemed appropriate.

Meanwhile, the central bank acknowledged that the recent events in the U.S. banking system were likely to result in tighter credit conditions, which is why it was seen as the Fed has softened its stance.

“The U.S. banking system is sound and resilient,” the Fed noted in a statement.


Projections released along with the rate decision on Wednesday point to a terminal rate of 5.1%.

The rate hike took the U.S. benchmark federal funds rate to 4.75%-5%.

However, the central bank said that its participants do not see rate cuts this year.