23 March 2023
If you are covering the Federal Reserve’s decision, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
"Despite some signals starting to flash red and fears around a potential wide scale banking crisis, the Federal Reserve has decided to stay the course and continue to raise interest rates. Today’s decision by the Fed indicates it still sees inflation as the number one priority to address currently, perhaps indicating that it is comfortable with what is happening to the regional banks in the US just now.
"Inflation is proving stickier than feared, with core inflation being particularly stubborn. This has caused the Fed to feel it has to continue to act, and Jerome Powell is now beginning to act on his warning to Congress that interest rates will likely have to go above 5% if inflation does not come down quicker.
"For now, the cracks in the banking sector appear to be small and affecting only a handful of players. Furthermore, the Credit Suisse fallout will have little impact on the US financial system and thus the Fed is likely feeling quite comfortable in continuing to raise rates, despite the impact it will have on the consumer. However, events of the last two weeks have shown things can change very quickly and thus further rate rises could have unintended consequences. Inflation is difficult to get under control, and while interest rate rises help do the job, they can also set off another chain of events. The Fed will be hoping this latest one doesn’t do that."
