Bloomberg: Here are the key takeaways from the Federal Reserve’s interest-rate decision and Chairman Jerome Powell’s news conference Wednesday. Policymakers lifted rates by 25 basis points to a target range of 4.75% to 5%. Powell said officials did consider pausing increases in the days leading up to the meeting but in the end the hike got unanimous support. The bottom line is that inflation is still too high and more interest rate increases are needed. The Fed plans to address financial stability through its more targeted programs.
The Fed chief began the press conference by saying the banking system is sound, and he emphasized the steps the central bank took to provide liquidity. But he said there is still considerable uncertainty over how much the banking disruptions will tighten lending conditions and slow the economy. If there is a big pullback in lending that weighs on growth, the Fed will not need to raise interest rates as much, Powell said.
Median projections for where interest rates will be by the end of this year were unchanged at 5.1%, the same as what officials were projecting in December. However, the dots did move, and some officials penciled in a slightly more hawkish path for rates. Powell was careful to note that officials are still not penciling in rate cuts for this year.
Policymakers made no changes to their balance sheet runoff and will continue to shrink their bond holdings by up to $95 billion a month as previously planned. Powell made the distinction that the balance sheet is growing because of the Fed’s new liquidity programs but made it clear that those efforts are separate from monetary policy.
Stocks initially rose but reversed course as the presser went on, with the S&P 500 down 0.4% as of 3:34 p.m. in New York. The Dow Jones Industrial Average was lower by 0.5%, while the Russell 2000 index of smaller companies fell more than 1%. Traders pointed to comments from Powell about the Fed being open to further hikes should it see the need for them, but also to Treasury Secretary Janet Yellen saying that a move to back all bank deposits with FDIC insurance is “not something that we have looked at.”