In some good news (finally) for the financial industry, the annual stress test conducted by the Federal Reserve shows that Wall Street's 23 larges&nbsp;banks are well-prepared to withstand severe economic downturns and real estate market instability, Bloomberg reported.

The stress test examines various economic scenarios and helps determine the value of funds banks must set aside as a financial cushion. Despite concerns over new capital requirements and regulatory changes, the results affirm the overall strength and capitalization of the banking industry.&nbsp;Notably, this year's criteria were established prior to the regional bank turmoil that occurred in March.

The annual stress test holds significant importance within the financial industry, as passing scores allow banking giants to return substantial amounts of money to their investors. However, it is expected that the results this year may take time to lead to dividend and buyback announcements, as many banks have expressed the need for clarity on new capital requirements that have been under discussion for several years. The Federal Reserve said that banks could start revealing their payout plans on Friday, but it is also considering overhauling its supervision efforts, Bloomberg reported.

Nonetheless, the stress test results reinforce claims that the banking industry remains robust and well-capitalized. Bloomberg quoted prominent bank executives, including Jamie Dimon, the CEO of JPMorgan Chase &amp; Co., as saying that increasing the mandatory reserve amounts would negatively impact lending. This year's hypothetical scenario involved:

<ul>
	<li dir="ltr">
	A surge in the U.S. unemployment rate to 10%.
	</li>
	<li dir="ltr">
	A 40% plunge in commercial real estate prices.
	</li>
	<li dir="ltr">
	A significant strengthening of the U.S. dollar against major currencies.
	</li>
</ul>

Additionally, the eight largest U.S. banks faced an exploratory market shock to their trading books for the first time, testing their resilience against greater inflationary pressures and rising interest rates.

According to Michael Barr, the Fed's vice chair for supervision,&nbsp;the stress test is a valuable measure of strength. But he adds that it is essential to remain cautious regarding potential risks and continue efforts to ensure the resilience of banks in various economic scenarios and market shocks.

The additional shock component introduced in this year's stress test will not affect capital requirements directly. Still, it will aid regulators in understanding trading risks and preparing for testing banks against multiple scenarios in the future. The Fed stated that 'the largest banks trading books were resilient to the rising rate environment tested.' This outcome serves as a reassuring response to concerns following recent bank failures.

Late trading saw shares of major banks, including JPMorgan, Wells Fargo &amp; Co., and Goldman Sachs, experience a rise in value. However, some voices cited by Bloomberg, such as Dennis Kelleher from Better Markets, a Washington-based group advocating for stricter financial rules, argued that urgent changes to the stress test format are necessary. They believe the 2023 exams failed to fully capture the extent of risk within the banking system.

(With Inputs from Bloomberg)

In some good news (finally) for the financial industry, the annual stress test conducted by the Federal Reserve shows that Wall Street's 23 larges banks are well-prepared to withstand severe economic downturns and real estate market instability, Bloomberg reported.

In some good news (finally) for the financial industry, the annual stress test conducted by the Federal Reserve shows that Wall Street's 23 larges banks are well-prepared to withstand severe economic downturns and real estate market instability, Bloomberg reported. The stress test examines various economic scenarios and helps determine the value of funds banks must set aside as a financial cushion. Despite concerns over new capital requirements and regulatory changes, the results affirm the overall strength and capitalization of the banking industry. Notably, this year's criteria were established prior to the regional bank turmoil that occurred in March. The annual stress test holds significant importance within the financial industry, as passing scores allow banking giants to return substantial amounts of money to their investors. However, it is expected that the results this year may take time to lead to dividend and buyback announcements, as many banks have expressed the need for clarity on new capital requirements that have been under discussion for several years. The Federal Reserve said that banks could start revealing their payout plans on Friday, but it is also considering overhauling its supervision efforts, Bloomberg reported. Nonetheless, the stress test results reinforce claims that the banking industry remains robust and well-capitalized. Bloomberg quoted prominent bank executives, including Jamie Dimon, the CEO of JPMorgan Chase & Co., as saying that increasing the mandatory reserve amounts would negatively impact lending. This year's hypothetical scenario involved: A surge in the U.S. unemployment rate to 10%. A 40% plunge in commercial real estate prices. A significant strengthening of the U.S. dollar against major currencies. Additionally, the eight largest U.S. banks faced an exploratory market shock to their trading books for the first time, testing their resilience against greater inflationary pressures and rising interest rates. According to Michael Barr, the Fed's vice chair for supervision, the stress test is a valuable measure of strength. But he adds that it is essential to remain cautious regarding potential risks and continue efforts to ensure the resilience of banks in various economic scenarios and market shocks. The additional shock component introduced in this year's stress test will not affect capital requirements directly. Still, it will aid regulators in understanding trading risks and preparing for testing banks against multiple scenarios in the future. The Fed stated that 'the largest banks trading books were resilient to the rising rate environment tested.' This outcome serves as a reassuring response to concerns following recent bank failures. Late trading saw shares of major banks, including JPMorgan, Wells Fargo & Co., and Goldman Sachs, experience a rise in value. However, some voices cited by Bloomberg, such as Dennis Kelleher from Better Markets, a Washington-based group advocating for stricter financial rules, argued that urgent changes to the stress test format are necessary. They believe the 2023 exams failed to fully capture the extent of risk within the banking system. (With Inputs from Bloomberg)

Dollars of Confidence: Wall Street heavyweights pass Stress Test, clear payout doubts

The US Federal Reserve paused its interest-rate hiking spree on Wednesday, avoiding what would have been an 11th consecutive increase. &nbsp;According to CNBC, the Fed was analysing the impact of the previous 10 increases on the economy, while leaving the rates unchanged at 5-5.25 per cent. It also added that further interest rate hikes were likely later this year, as the Fed struggles to achieve its inflation target of 2 per cent.

“We have raised our policy interest rate by five percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” Fed Chair Jerome Powell said at a press conference on Wednesday.

<h2>Is inflation under control in US?</h2>

The decision made by Federal Reserve's Federal Open Market Committee (FOMC) indicates a shift in its perspective on inflation. In June of last year, inflation reached a 40-year high of 9.1 per cent due to surging food and energy costs. However, inflation has since declined to 4 per cent in May, the lowest since April 2021.

In a statement, the FOMC explained that maintaining the target range for interest rates during this meeting would allow the committee to evaluate additional information and its implications for monetary policy. The committee will continue to assess the appropriate course of action while monitoring incoming data and its impact on the economic outlook.

<h2>Future interest rate hikes highly likely</h2>

Despite the decision to pause interest rate hikes, Fed officials have hinted that future increases may occur, depending on how close the economy gets to the 2 per cent inflation target. Higher interest rates result in increased borrowing costs, affecting mortgages, car payments, student loans, and other loans.

Watch:&nbsp;Is US economy really rich? Or is it a facade?

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Since March 2022, the Federal Reserve has raised interest rates 10 consecutive times, at a pace reminiscent of the 1980s. The increases have varied from 0.75 per cent during the summer and fall, when inflation was at its peak, to 0.25 per cent seen this spring. The current inflation rate stands at 5 per cent to 5.25 per cent, the highest since the 2008 financial crisis that preceded the 2008 global recession.

<h2>Fed continuously monitoring labour market</h2>

While the Federal Reserve has been using interest rates as a means to control inflation, it has also been closely monitoring the labour market for signs of economic cooling. In January, employers added 517,000 jobs, surpassing expectations and leading Fed officials to believe that interest rate increases could still occur without negatively impacting the job market.

<a href="https://www.wionews.com/business-economy/more-bad-news-for-the-us-economy-trade-deficit-widens-to-6-month-high-602028">Also read:&nbsp;More bad news for the US economy: Trade deficit widens to 6-month high</a>

Recent data from May indicates a robust job market, with the addition of 339,000 jobs. However, the unemployment rate has seen a slight increase from 3.4 per cent in April to 3.7 per cent in May.

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The US Federal Reserve paused its interest-rate hiking spree on Wednesday, avoiding what would have been an 11th consecutive increase. According to CNBC, the Fed was analysing the impact of the previous 10 increases on the economy, while leaving the rates unchanged at 5-5.

The US Federal Reserve paused its interest-rate hiking spree on Wednesday, avoiding what would have been an 11th consecutive increase. According to CNBC, the Fed was analysing the impact of the previous 10 increases on the economy, while leaving the rates unchanged at 5-5.25 per cent. It also added that further interest rate hikes were likely later this year, as the Fed struggles to achieve its inflation target of 2 per cent. “We have raised our policy interest rate by five percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” Fed Chair Jerome Powell said at a press conference on Wednesday. Is inflation under control in US? The decision made by Federal Reserve's Federal Open Market Committee (FOMC) indicates a shift in its perspective on inflation. In June of last year, inflation reached a 40-year high of 9.1 per cent due to surging food and energy costs. However, inflation has since declined to 4 per cent in May, the lowest since April 2021. In a statement, the FOMC explained that maintaining the target range for interest rates during this meeting would allow the committee to evaluate additional information and its implications for monetary policy. The committee will continue to assess the appropriate course of action while monitoring incoming data and its impact on the economic outlook. Future interest rate hikes highly likely Despite the decision to pause interest rate hikes, Fed officials have hinted that future increases may occur, depending on how close the economy gets to the 2 per cent inflation target. Higher interest rates result in increased borrowing costs, affecting mortgages, car payments, student loans, and other loans. Watch: Is US economy really rich? Or is it a facade? × Since March 2022, the Federal Reserve has raised interest rates 10 consecutive times, at a pace reminiscent of the 1980s. The increases have varied from 0.75 per cent during the summer and fall, when inflation was at its peak, to 0.25 per cent seen this spring. The current inflation rate stands at 5 per cent to 5.25 per cent, the highest since the 2008 financial crisis that preceded the 2008 global recession. Fed continuously monitoring labour market While the Federal Reserve has been using interest rates as a means to control inflation, it has also been closely monitoring the labour market for signs of economic cooling. In January, employers added 517,000 jobs, surpassing expectations and leading Fed officials to believe that interest rate increases could still occur without negatively impacting the job market. Also read: More bad news for the US economy: Trade deficit widens to 6-month high Recent data from May indicates a robust job market, with the addition of 339,000 jobs. However, the unemployment rate has seen a slight increase from 3.4 per cent in April to 3.7 per cent in May. WATCH WION LIVE HERE ×

US Federal Reserve halts interest rate hike-spree after 10 increases in a row

The Federal Reserve rate hike on Wednesday led to a deep selloff in US regional banks on Thursday.

Stocks of US regional lenders such as&nbsp;Western Alliance and Pacific West dropped over 60 percent before recouping some losses. First Horizon tumbled as much as 45 percent, its biggest intraday fall since the 2008 financial crisis. Multiple other lenders, both large and small, too were caught up in the panic.

Now, the fear is that another financial shoe may soon drop.&nbsp;

All of this demonstrates how market anxiety persists after a series of bank failures and deposit outflows.

Investors are sounding the alarm that banking sector pressures are far from finished. In such a stressful scenario, some lenders have been trying to assure investors — with little to no avail.

All this despite reassurances from US Fed chair Jerome Powell that authorities are getting closer to managing the issue.

“We like and feel confident about the Fed stepping in to create some backstop for the regional banks post the Silicon Valley Bank-episode. But there's certainly, you know, probably some more weakness to be seen in the sector as time continues to unfold," Jason Ray, founder and investment director, Zenith Wealth Partners, told Reuters.&nbsp;

But the key question is: why global central banks are being blamed for the ongoing banking crisis?&nbsp;

Overall, major economies have raised rates by a whopping 40 percent combined in the current tightening cycle. The Fed has raised rates by 5 percent over the past year after openly dismissing rising inflation as transitory in 2021.

But central banks' rhetoric in recent months has been the need to control soaring inflation. So, it is clear that major central banks were late in tightening policy to reign in inflation.

The central banks&nbsp;failed in their primary job of price stability. Their&nbsp;aggressive pace and the jumbo-sized interest rate hikes make one thing clear - major central banks panicked.

It takes at least two quarters for a policy decision to transmit into the real economy. But as many central banks&nbsp;were reacting rather than being pro-active, they lost control of inflation.

Now, fears of a harsh recession have been reinforced by a roaring selloff in regional banks.

As such, many analysts predict central banks will take their knives out before this year's end. Traders have increased their bets on interest rate cuts from the Fed, with the first rate cut now expected to come as early as July 2023.&nbsp;

If that does happen, then the latest rate hike cycle will be remembered as the biggest policy mistake in the history of central banks.

(With agency inputs)

The Federal Reserve rate hike on Wednesday led to a deep selloff in US regional banks on Thursday. Stocks of US regional lenders such as Western Alliance and Pacific West dropped over 60 percent before recouping some losses.

The Federal Reserve rate hike on Wednesday led to a deep selloff in US regional banks on Thursday. Stocks of US regional lenders such as Western Alliance and Pacific West dropped over 60 percent before recouping some losses. First Horizon tumbled as much as 45 percent, its biggest intraday fall since the 2008 financial crisis. Multiple other lenders, both large and small, too were caught up in the panic. Now, the fear is that another financial shoe may soon drop. All of this demonstrates how market anxiety persists after a series of bank failures and deposit outflows. Investors are sounding the alarm that banking sector pressures are far from finished. In such a stressful scenario, some lenders have been trying to assure investors — with little to no avail. All this despite reassurances from US Fed chair Jerome Powell that authorities are getting closer to managing the issue. “We like and feel confident about the Fed stepping in to create some backstop for the regional banks post the Silicon Valley Bank-episode. But there's certainly, you know, probably some more weakness to be seen in the sector as time continues to unfold," Jason Ray, founder and investment director, Zenith Wealth Partners, told Reuters. But the key question is: why global central banks are being blamed for the ongoing banking crisis? Overall, major economies have raised rates by a whopping 40 percent combined in the current tightening cycle. The Fed has raised rates by 5 percent over the past year after openly dismissing rising inflation as transitory in 2021. But central banks' rhetoric in recent months has been the need to control soaring inflation. So, it is clear that major central banks were late in tightening policy to reign in inflation. The central banks failed in their primary job of price stability. Their aggressive pace and the jumbo-sized interest rate hikes make one thing clear - major central banks panicked. It takes at least two quarters for a policy decision to transmit into the real economy. But as many central banks were reacting rather than being pro-active, they lost control of inflation. Now, fears of a harsh recession have been reinforced by a roaring selloff in regional banks. As such, many analysts predict central banks will take their knives out before this year's end. Traders have increased their bets on interest rate cuts from the Fed, with the first rate cut now expected to come as early as July 2023. If that does happen, then the latest rate hike cycle will be remembered as the biggest policy mistake in the history of central banks. (With agency inputs)

US bank rout rages on: Regional banks extend losses after Fed rate hikes

Inflation in the U.S eased slightly in April but still remained elevated, media reports said on Wednesday.

Moderating price pressures is good news for the US as that gives the Federal Reserve room to pause.

The consumer price index (CPI) rose by a below-forecast 4.9 percent from a year earlier, the first sub-5 percent reading in two years. Notably, economists had forecast the rate to be 5 percent.

The annual CPI peaked at 9.1 percent last June, posting its biggest increase since November 1981, and is subsiding as last year’s initial surge in energy prices following Russia’s invasion of Ukraine drops out of the calculation.

But the reactions to the latest US inflation report were mixed.&nbsp;

For some analysts, the inflation report does not give a clear signal on Federal Reserve's rate path.

“Today’s consumer inflation report supports the case for the Fed to seriously contemplate a pause in rate hikes in June, but does not support any near-term rate cuts,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

Inflation has definitely moderated from overheated rates last year. But it still remains elevated and above the Federal Reserve's target of 2 percent.

“On balance, inflation is still too high and it is not going to fall back to 2% if it increases 0.4% a month,” Chris Low, chief economist at FHN Financial in New York, told Reuters.&nbsp;

The Federal Reserve's dichotomy is whether to look at inflation and hike rates or focus on the banking crisis.&nbsp;The aggressive rate hikes over the past year have hurt the banking industry heavily. But the central bank had no choice but to list rates because of soaring inflation.

Now, the domino effect of banks collapsing is keeping the US central bank on its toes.

(With agency inputs)&nbsp;

Inflation in the U.S eased slightly in April but still remained elevated, media reports said on Wednesday. Moderating price pressures is good news for the US as that gives the Federal Reserve room to pause.

Inflation in the U.S eased slightly in April but still remained elevated, media reports said on Wednesday. Moderating price pressures is good news for the US as that gives the Federal Reserve room to pause. The consumer price index (CPI) rose by a below-forecast 4.9 percent from a year earlier, the first sub-5 percent reading in two years. Notably, economists had forecast the rate to be 5 percent. The annual CPI peaked at 9.1 percent last June, posting its biggest increase since November 1981, and is subsiding as last year’s initial surge in energy prices following Russia’s invasion of Ukraine drops out of the calculation. But the reactions to the latest US inflation report were mixed. For some analysts, the inflation report does not give a clear signal on Federal Reserve's rate path. “Today’s consumer inflation report supports the case for the Fed to seriously contemplate a pause in rate hikes in June, but does not support any near-term rate cuts,” said Scott Anderson, chief economist at Bank of the West in San Francisco. Inflation has definitely moderated from overheated rates last year. But it still remains elevated and above the Federal Reserve's target of 2 percent. “On balance, inflation is still too high and it is not going to fall back to 2% if it increases 0.4% a month,” Chris Low, chief economist at FHN Financial in New York, told Reuters. The Federal Reserve's dichotomy is whether to look at inflation and hike rates or focus on the banking crisis. The aggressive rate hikes over the past year have hurt the banking industry heavily. But the central bank had no choice but to list rates because of soaring inflation. Now, the domino effect of banks collapsing is keeping the US central bank on its toes. (With agency inputs)

US inflation eases in April: Markets see only tiny possibility of June rate hike

The US Federal Reserve raised its interest rates by a quarter of a percentage point for a 10th&nbsp;consecutive time on Wednesday (May 3), while indicating a pause in further increases. This comes amid recent bank failures as well as Congress’ ongoing deadlock over the debt ceiling issue.&nbsp;

The central bank has been aggressively raising interest rates since March last year in a bid to control the US’ soaring inflation and pushed its benchmark overnight interest rate somewhere in the 5.00 per cent and 5.25 per cent range. In the statement, the Fed also said that it would “take into account” the impact of tighter monetary policy and “economic and financial developments” going forward.

During the press conference, Fed Chair Jerome Powell said that the central bank still views inflation as too high and that it remains concerned by high price pressures. However, it no longer “anticipates” further hikes and monitors the incoming data to make the decision if more hikes “may be appropriate.”

Therefore, Powell has said that it is too soon to say if the rate-hike cycle is over as the decisions made by officials are taking on a “meeting-by-meeting” basis, adding, “we are prepared to do more&nbsp;with rate rises if needed.”&nbsp;

The decision about the recent hike came after the policy-setting Federal Open Market Committee’s (FOMC) recent meeting and was in line with the expectations of analysts and traders.&nbsp;

Notably, the recent statement by the central bank marks a departure from the last rate announcement where policymakers had said that they expect “additional policy firming” to rein in inflation. This time around, the Fed’s ease of guidance suggests that the economy is somewhat beginning to cool.&nbsp;

“If you add up all the tightening that's going on through various channels, we feel like we're getting close or are maybe even there,” said Powell, as quoted by Reuters, about monetary policy. The Fed chair also pushed back on market expectations of rate cuts this year adding, “We on the committee have a view that inflation is going to come down not so quickly, it will take some time.”&nbsp;

It is worth noting that the Fed’s policy rate, this time around, is somewhat close to where it was on the eve of the 2008 financial crisis. The rate hikes have more than doubled mortgage rates, elevated the costs of auto loans, credit card borrowing and business loans and heightened the risk of a recession, reported The Associated Press.&nbsp;

(With inputs from agencies)&nbsp; 
 
 
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The US Federal Reserve raised its interest rates by a quarter of a percentage point for a 10th consecutive time on Wednesday (May 3), while indicating a pause in further increases.

The US Federal Reserve raised its interest rates by a quarter of a percentage point for a 10th consecutive time on Wednesday (May 3), while indicating a pause in further increases. This comes amid recent bank failures as well as Congress’ ongoing deadlock over the debt ceiling issue. The central bank has been aggressively raising interest rates since March last year in a bid to control the US’ soaring inflation and pushed its benchmark overnight interest rate somewhere in the 5.00 per cent and 5.25 per cent range. In the statement, the Fed also said that it would “take into account” the impact of tighter monetary policy and “economic and financial developments” going forward. During the press conference, Fed Chair Jerome Powell said that the central bank still views inflation as too high and that it remains concerned by high price pressures. However, it no longer “anticipates” further hikes and monitors the incoming data to make the decision if more hikes “may be appropriate.” Therefore, Powell has said that it is too soon to say if the rate-hike cycle is over as the decisions made by officials are taking on a “meeting-by-meeting” basis, adding, “we are prepared to do more with rate rises if needed.” The decision about the recent hike came after the policy-setting Federal Open Market Committee’s (FOMC) recent meeting and was in line with the expectations of analysts and traders. Notably, the recent statement by the central bank marks a departure from the last rate announcement where policymakers had said that they expect “additional policy firming” to rein in inflation. This time around, the Fed’s ease of guidance suggests that the economy is somewhat beginning to cool. “If you add up all the tightening that's going on through various channels, we feel like we're getting close or are maybe even there,” said Powell, as quoted by Reuters, about monetary policy. The Fed chair also pushed back on market expectations of rate cuts this year adding, “We on the committee have a view that inflation is going to come down not so quickly, it will take some time.” It is worth noting that the Fed’s policy rate, this time around, is somewhat close to where it was on the eve of the 2008 financial crisis. The rate hikes have more than doubled mortgage rates, elevated the costs of auto loans, credit card borrowing and business loans and heightened the risk of a recession, reported The Associated Press. (With inputs from agencies) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

US Federal Reserve announces quarter-point interest rate hike, signals potential pause

The US Federal Reserve raised its benchmark lending rate on Wednesday, as it sought to strike a balance between curbing high inflation and averting further upheaval in the commercial banking sector.

The quarter-point increase, which was in line with expectations, lifts the target range to 4.75-5.00 per cent at the end of a two-day policy meeting.

In a statement, the Fed said recent banking sector developments "are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation."

The policy-setting Federal Open Market Committee (FOMC) added that "some additional policy firming may be appropriate" to get to a stance that is sufficiently restrictive to bring inflation down.

The latest increase was the same size as the central bank's previous rate decision in February.&nbsp;It comes after two weeks of market turmoil following the collapse of three regional lenders.

Wednesday's decision underscores the Fed's determination to tackle inflation, which remains stubbornly above policymakers' long-term annual target of two per cent despite an effort to lower price increases.

<h2>Hot data and banking uncertainty</h2>

The implosions of Silicon Valley Bank (SVB) and two other regional lenders pummelled banking stocks around the world last week, with Swiss investment bank Credit Suisse swallowed up by regional rival UBS after its shares sank to a record low.

Asian stock markets and most European indices rose ahead of the Fed's decision. Wall Street stocks picked up shortly after the Fed's announcement.

The combination of hot US economic data at the start of the year and uncertainty in the banking sector has led most analysts to predict the Fed will continue with a more modest hiking cycle than was previously expected.

"After the recent news, the recent developments in the financial markets, we now see a kind of risk to both sides," Stephen Juneau, senior US economist at Bank of America Global Research, told AFP ahead of the decision.

<h2>More 'dovish' language</h2>

Treasury Secretary Janet Yellen said Tuesday that the US banking sector was "stabilising" after authorities stepped in to protect deposits following the failures of SVB and Signature Bank.

But she conceded that "similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion."

Yellen's comments underscored this week's relief rally in the stock markets, along with actions by the Fed and other major central banks to improve lenders' access to liquidity.&nbsp;

On Wednesday, the Fed also updated its economic projections, slightly lowering its 2023 GDP growth projections 2023 to 0.4 per cent from 0.5 per cent in December.

Median projections for the Fed's benchmark rate at the end of this year were unchanged, while inflation expectations rose increased slightly.

The Fed's announcement follows on the heels of the European Central Bank's decision last week to raise rates by 0.5 percentage points.

ECB chief Christine Lagarde warned on Wednesday that the Eurozone's monetary policymakers "will still have ground to cover to make sure that inflation pressures are stamped out."&nbsp;

She said the recent banking turmoil could add to "downside risks" in the single currency area.

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The US Federal Reserve raised its benchmark lending rate on Wednesday, as it sought to strike a balance between curbing high inflation and averting further upheaval in the commercial banking sector.

The US Federal Reserve raised its benchmark lending rate on Wednesday, as it sought to strike a balance between curbing high inflation and averting further upheaval in the commercial banking sector. The quarter-point increase, which was in line with expectations, lifts the target range to 4.75-5.00 per cent at the end of a two-day policy meeting. In a statement, the Fed said recent banking sector developments "are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation." The policy-setting Federal Open Market Committee (FOMC) added that "some additional policy firming may be appropriate" to get to a stance that is sufficiently restrictive to bring inflation down. The latest increase was the same size as the central bank's previous rate decision in February. It comes after two weeks of market turmoil following the collapse of three regional lenders. Wednesday's decision underscores the Fed's determination to tackle inflation, which remains stubbornly above policymakers' long-term annual target of two per cent despite an effort to lower price increases. Hot data and banking uncertainty The implosions of Silicon Valley Bank (SVB) and two other regional lenders pummelled banking stocks around the world last week, with Swiss investment bank Credit Suisse swallowed up by regional rival UBS after its shares sank to a record low. Asian stock markets and most European indices rose ahead of the Fed's decision. Wall Street stocks picked up shortly after the Fed's announcement. The combination of hot US economic data at the start of the year and uncertainty in the banking sector has led most analysts to predict the Fed will continue with a more modest hiking cycle than was previously expected. "After the recent news, the recent developments in the financial markets, we now see a kind of risk to both sides," Stephen Juneau, senior US economist at Bank of America Global Research, told AFP ahead of the decision. More 'dovish' language Treasury Secretary Janet Yellen said Tuesday that the US banking sector was "stabilising" after authorities stepped in to protect deposits following the failures of SVB and Signature Bank. But she conceded that "similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion." Yellen's comments underscored this week's relief rally in the stock markets, along with actions by the Fed and other major central banks to improve lenders' access to liquidity. On Wednesday, the Fed also updated its economic projections, slightly lowering its 2023 GDP growth projections 2023 to 0.4 per cent from 0.5 per cent in December. Median projections for the Fed's benchmark rate at the end of this year were unchanged, while inflation expectations rose increased slightly. The Fed's announcement follows on the heels of the European Central Bank's decision last week to raise rates by 0.5 percentage points. ECB chief Christine Lagarde warned on Wednesday that the Eurozone's monetary policymakers "will still have ground to cover to make sure that inflation pressures are stamped out." She said the recent banking turmoil could add to "downside risks" in the single currency area. WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

US Fed delivers 25 points rate hike amid global banking turmoil

US fed rate hike latest update:&nbsp;The stage is set for the first Federal Open Market Committee (FOMC) meeting slated to be held on January 31-February 1, 2023. The meeting is of great interest to stock market players across the world. The announcement of the interest rate hikes by the Fed will be made on February 1 at 2:00 PM ET or 12:30 AM on February 2 as per IST. For a second consecutive meeting, the US Federal Reserve is expected to raise interest by a quarter percentage point. The US Fed earlier resorted to a modest interest rate hike of 50 basis point increase in December after 4 consecutive interest rate hikes of 75 basis points. &nbsp;FOMC meets at least 8 times a year, with additional meetings also lined up as required.&nbsp;

<h2>European and American markets close lower</h2>

Investors around the world, including in Asia and Europe, are looking for hints about how much interest rate hike will be announced by the Fed in the face of rising inflation. The Stoxx 600 index for all of Europe dropped 0.2 per cent at the closing, with the majority of sectors trading down. Food and beverage stocks finished 0.7 per cent higher, while the IT sector saw the worst decline, falling 1.7 per cent. The same trend was visible across American and Asian stocks.

<h2>When are interest rate cuts expected?</h2>

The Fed won’t cut interest rates until and unless inflation in the US gets under control. A substantial development towards achieving the 2 per cent inflation target should be visible to get US Fed to cut interest rates. Analysts believe that we won’t be able to see interest rate cuts before Q4 2023 or early Q1 2024. Financial Express quoted Kavan Choksi, a successful investor, business management, and wealth consultant at KC Consulting, as saying that the US might enter a recession in 2023 as the Fed won’t cut interest rates that might trigger counter-productive results for the skyrocketing inflation in the country.

US fed rate hike latest update: The stage is set for the first Federal Open Market Committee (FOMC) meeting slated to be held on January 31-February 1, 2023. The meeting is of great interest to stock market players across the world.

US fed rate hike latest update: The stage is set for the first Federal Open Market Committee (FOMC) meeting slated to be held on January 31-February 1, 2023. The meeting is of great interest to stock market players across the world. The announcement of the interest rate hikes by the Fed will be made on February 1 at 2:00 PM ET or 12:30 AM on February 2 as per IST. For a second consecutive meeting, the US Federal Reserve is expected to raise interest by a quarter percentage point. The US Fed earlier resorted to a modest interest rate hike of 50 basis point increase in December after 4 consecutive interest rate hikes of 75 basis points. FOMC meets at least 8 times a year, with additional meetings also lined up as required. European and American markets close lower Investors around the world, including in Asia and Europe, are looking for hints about how much interest rate hike will be announced by the Fed in the face of rising inflation. The Stoxx 600 index for all of Europe dropped 0.2 per cent at the closing, with the majority of sectors trading down. Food and beverage stocks finished 0.7 per cent higher, while the IT sector saw the worst decline, falling 1.7 per cent. The same trend was visible across American and Asian stocks. When are interest rate cuts expected? The Fed won’t cut interest rates until and unless inflation in the US gets under control. A substantial development towards achieving the 2 per cent inflation target should be visible to get US Fed to cut interest rates. Analysts believe that we won’t be able to see interest rate cuts before Q4 2023 or early Q1 2024. Financial Express quoted Kavan Choksi, a successful investor, business management, and wealth consultant at KC Consulting, as saying that the US might enter a recession in 2023 as the Fed won’t cut interest rates that might trigger counter-productive results for the skyrocketing inflation in the country.

US FOMC (Fed) Meeting 2023 Today: Check time & expected hike; know when interest rate cuts are expected

US Federal Reserve has held its key interest rates near zero and said it plans to continue supporting economic recovery. Fed is maintaining the policies until the economy heals further from the effects of COVID-19 pandemic.

World Business Watch: Powell waves inflation worries away as Fed holds rates near zero