Wednesday

<div class="textg" style="text-align: justify; font-weight: lighter; line-height: 1.3em; font-size: 15px; border-radius: 3px; color: #80909a; padding: 10px; background-color: #F4F6F9; margin-bottom: 15px;">Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our&nbsp;<a href="https://tokenist.com/terms-of-service/" style="text-decoration:underline;color:#3c7b7b" target="_blank" rel="noreferrer noopener" class="deco-link">website policy</a>&nbsp;prior to making financial decisions.</div>



<p class="has-drop-cap">After its March meeting, the FOMC <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20230322b.htm" target="_blank" aria-label="announced  (opens in a new tab)" rel="noreferrer noopener nofollow" class="deco-link">announced </a>this Wednesday it is again raising interest rates by 25 basis points. The decision is in line with most analyst expectations and marks the first full year of continuous tightening in the wake of dangerously high inflation.</p>



<h3 id="fed-raises-interest-rates-by-another-25-bps">FED Raises Interest Rates by Another 25 BPS</h3>



<p>After the conclusion of the FOMC meeting held on March 20th and 21st, the FED announced it would again raise interest rates by 25 basis points. The announcement brings the target rate up to the 4.75%-5% range. The decision is in line with most forecasts and marks the first full year of rate increases which started in March 2022 after a long period of near-zero interest rates.</p>



<p>FED’s trajectory is primarily driven by the goal to reduce inflation which peaked in June <a href="https://tokenist.com/cpi-inflation-at-9-1-beats-highest-estimates/" rel="dofollow" class="deco-link">when it reached 9.1%</a>—a 40-year high. The ongoing increases have yielded some results as inflation has been declining since last summer with the <a href="https://tokenist.com/february-cpi-at-6-yoy-as-tough-decision-lies-ahead-for-the-fed/" class="deco-link">latest CPI print showing 6%</a>. Despite the decrease, the numbers are still significantly higher than the target of 2%.</p>



<p>Every FOMC since March 2022 has brought a rate increase with the most aggressive phase between June and November seeing <a href="https://tokenist.com/fed-raises-interest-rates-by-75-bps-in-2022s-6th-hike/" rel="dofollow" class="deco-link">four consecutive 75 BPS hikes</a>. The meeting that concluded today was somewhat more contentious. While initial estimates were forecasting a 25-point increase, Powell’s recent testimony brought expectations up to a 50-point increase, before the analysts made another pivot in the wake of the ongoing banking crisis with <a href="https://www.bloomberg.com/news/articles/2023-03-13/nomura-predicts-rate-cut-and-qt-halt-at-upcoming-fed-meeting" target="_blank" aria-label=" (opens in a new tab)" rel="noreferrer noopener nofollow" class="deco-link">Nomura even predicting a 25 BPS decrease</a> in interest rates.</p>


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<h3 id="why-was-the-march-meeting-debated-so-hotly">Why Was the March Meeting Debated so Hotly?</h3>



<p>While the policy of continuously raising rates has been facing some opposition almost since its very inception, the Federal Open Market Committee has <a href="https://www.cnbc.com/2023/03/07/fed-chair-powell-says-interest-rates-are-likely-to-be-higher-than-previously-anticipated.html" target="_blank" aria-label=" (opens in a new tab)" rel="noreferrer noopener nofollow" class="deco-link">remained steadfast in its implementation</a>. The March meeting, and its rate change, were however debated more hotly than the previous ones.&nbsp;</p>



<p>Together with the ongoing month, a banking crisis was inaugurated with the fall of three major US banks in rapid succession. Furthermore, the fate of another regional bank—the First Republic Bank—remains uncertain as, by Monday, it had lost nearly half of its deposits and, on Monday alone, it saw its <a href="https://tokenist.com/first-republic-bank-down-47-as-search-for-buyer-continues/" rel="dofollow" class="deco-link">share price nearly halved</a>. Some have declared the hardships within the sectors to be the first concrete adverse effects of the FED’s tightening and have subsequently called for a halt or even a reversal in policy.</p>



<p>Calls for a pivot have, however, been increasing for months before the banking crisis. One of the main cited worries was that the FED may have already overtightened without realizing it as all effects of the heightened interest rates become visible only months after their implementation. Senator Elizabeth Warren in particular has been <a href="https://www.reuters.com/markets/us/senator-warren-worries-that-fed-will-tip-us-economy-into-recession-2022-08-28/" target="_blank" aria-label=" (opens in a new tab)" rel="noreferrer noopener nofollow" class="deco-link">opposed to Chair Powell’s approach</a> highlighting the damage the likely rise in unemployment could cause.</p>


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<p><strong><em>Do you think the FED has overtightened with its interest rate hikes? Let us know in the comments below.</em></strong></p>
<p>The post <a rel="nofollow" href="https://tokenist.com/march-brings-another-25-bps-hike-despite-worries-stemming-from-bank-crisis/">March Brings Another 25 BPS Hike Despite Worries Stemming From Bank Crisis</a> appeared first on <a rel="nofollow" href="https://tokenist.com">Tokenist</a>.</p>

March Brings Another 25 BPS Hike Despite Worries Stemming From Bank Crisis

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