Federal Reserve Continue Interest-Rate Hikes Despite Warning of Recession

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WASHINGTON – The Federal Reserve officials are set to continue increasing interest rates at their upcoming meeting, despite warnings of a recession from their advisors.

They believe that more action is needed to tackle inflation.

During the previous policy meeting, officials lowered their expectations of how high interest rates should be raised following market turmoil caused by bank collapses.

However, they still raised the benchmark lending rate by a quarter point to a range of 4.75% to 5%.

This decision was made after considering the risk of a credit crunch and high levels of price pressure.

The Fed staff advised that there may be a mild recession later this year, but officials still felt that additional policy firming was necessary.

This position has been reiterated by several Fed speakers in recent days.

On Wednesday, a crucial indicator of US inflation hinted at moderation in March, but it is unlikely to deter the Fed from raising rates in May.

Economists predict a quarter-point increase at the upcoming meeting, followed by a prolonged pause.

However, the language used in the minutes, combined with comments from certain officials and the uncertain effects of credit tightening on the economy, imply that the rate trajectory is still undecided.

In the quarterly projections released in March, most officials anticipated that rates would rise to 5.1% this year, indicating one more quarter-point hike in May and then a prolonged pause.

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