Market report

Fed raises interest rate, indicates softer policy

Jerome Powell
Jerome Powell: likely to be bumpy

The US Federal Reserve set aside worries over the global banking system and hiked interest rates for the ninth time in a row as it prefers to focus on battling inflation.

Fed chair Jerome Power said: “The inflation fight still has a “long way to go and is likely to be bumpy.” 

However, he indicated that the Fed was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets spurred by the collapse of two US banks. Tonight’s statement said only that “some additional policy firming may be appropriate”.

As expected the rate was bumped up by just 25 basis points to a range of 4.75% and 5%, avoiding the feared 50bps rise that had been signalled a few weeks ago.

London’s blue chip FTSE 100 finished the day on a high, rising 31 points, or 0.4%, to 7,567, shrugging of a surprise surge in UK inflation on expectations that it will be a short term blip in a downward trend. However, it will put pressure on the Bank of England which announces the UK interest rate tomorrow.

“In recent days some have suggested that the febrile environment in the banking sector should give central banks pause for thought before raising rates further,” Institute of Directors chief economist Kitty Ussher said.  

“Today’s data suggests the opposite; the Bank of England’s job is not yet done,” Ussher added.

The consumer price index rose to 10.4% in February from 10.1% in January, having been expected to fall to 9.9%.

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