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Federal Reserve raises interest rates, says economy is ‘closer’ to end of hikes

The Federal Reserve has raised interest rates once more, but its latest statements indicate hikes could be nearing the end

Although May 3 saw interest rates rise for the tenth time since March 2022, the Federal Reserve has seemingly adopted a new stance on inflation.

The Federal Funds Rate now sits at a maximum 5.25%, its highest point since before the 2008 recession, and double the estimated natural rate of interest. The adjustments arrive after more than a year of fruitless attempts to stymy inflation growth which continued to edge upwards in April. The latest hike also arrives amidst a backdrop of increasing bank failures, with the latest victim, First Republic, being seized by the government on May 1. But while the Fed has consistently held that rate increases are necessary, the Federal Open Market Committee (FOMC) seemed less convinced after their most recent meeting.

Signs of lightening sentiment can be found in statements from Fed chair Jerome Powell, who is now calling the possibility of another hike an “open question.” On whether rates had reached a turning point, he also remarked, “We’re closer, or maybe even there.” These observations are decidedly less cautious than his previous comments, which regularly hinted at the possibility of more increases. More evidence of change comes from an earlier meeting held by the FOMC in March, during which members concluded that a 5.25% rate (the current level) would be “sufficiently restrictive” to cool the economy. Given that inflation has stayed in line with predictions, it seems reasonable for the committee to take a “wait and see” attitude on the newest hike.

However, while the Federal Reserve has yet to commit to another increase, it remains firmly convinced that rates will remain high well into the future. “We on the committee have a view that inflation is going to come down not so quickly, it will take some time,” spoke Powell, adding, “…if that forecast is broadly right, it would not be appropriate to cut rates.”

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Colin Velez
Colin Velez
Colin Velez is a staff writer/reporter for CBT News. After obtaining his bachelor’s in Communication from Kennesaw State University in 2018, he kicked off his writing career by developing marketing and public relations material for various industries, including travel and fashion. Throughout the next four years, he developed a love for working with journalists and other content creators, and his passion eventually led him to his current position. Today, Colin writes news content and coordinates stories with auto-industry insiders and entrepreneurs throughout the U.S.

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