Jerome Powell raised the rate to its highest point since 2007, but moved to calm markets by saying 'ongoing rate increases' would no longer be necessary as the Reserve keeps a close eye on the fallout caused by the collapse of Silicon Valley Bank.
The rise was the ninth consecutive increase delivered by the Fed as it struggles to reign in inflation and brings the federal funds rate to a new target range of 4.75 per cent to five per cent.
Echoing comments made earlier this week by Treasury Secretary Janet Yellen, Mr Powell said the US banking system was"sound and resilient" and he did not see any systemic weaknesses in the sector."This was a bank [SVB] that was an outlier in terms of both its percentage of uninsured deposits and in terms of its holdings of duration risk."
Estimates of how much damage the banking turmoil could cause were"guesswork" according to Mr Powell, but he said the Fed was keeping a watchful eye on the effects.Mr Powell also revealed the board had considered holding rates steady, and noted that they had removed the phrase"ongoing rate increases" from their published statement in a sign the Fed may be on the verge of pausing rises.
Growth next year will also be lower than previously expected at 1.2 per cent, down from 1.6 per cent in December.
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