Murky Path Forward
The Federal Reserve Open Market Committee raised its target for overnight interest rates 0.25%, although going into today’s meeting, economists’ forecasts were split between 0.25% and nothing; one bold group even forecast a rate cut.
While Fed Chair Jay Powell cautioned about possibly reaccelerating the pace of hikes after recent economic readings, stress in the regional banking system put a quick end to that prospect. The 2023 Fed does not have an enviable job. Not even three months into the year, and policymakers are contending with still-elevated inflation, clear risks of growth slowing, and a mini-banking crisis that their policies in 2022 helped spark. Going forward, the precautionary principle would hold that, in times of uncertainty, policy should move slowly, but the path ahead is as murky as any time in memory.
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