Regular increases in the federal funds rate could be winding down

The Federal Reserve suggested that the days of regular increases in the federal funds rate could be winding down.

The decision to increase federal funds rate by only 25 basis points on March 22, 2023, represents the first major test of its commitment to curtail inflation. This is the ninth increase in about a year. The Fed’s challenge was to demonstrate its resolve while maintaining confidence in the financial system amid the collapse of Silicon Valley Bank (SVB) and the fallout for regional banks. It indicated “additional policy firming may be appropriate,” but did not commit to a future course of action and acknowledged credit could become tighter.

However, the central bank suggested an end to rate hikes is near by removing a line from its statement about “on going increases” The median forecast among members of the Federal Open Market Committee is for one more increase this year. This should lead to lower rates in 2023.