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Essentials of Monetary Policy

Caught between a Rock and a Hard Place, the Fed Raises Rates 25 Points

March 22, 2023
Francis Généreux
Principal Economist

The Committee decided to raise the target range for the federal funds rate by 0.25 %. It is now in a range of 4.75% to 5.00%.

The U.S. banking system is sound and resilient.

The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. The Committee will closely monitor incoming information and assess the implications for monetary policy. 

Inflation is still too high and the labour market is still too tight, but financial market turmoil is complicating the Fed's job. It now has to consider how tighter credit conditions could affect the economy and ultimately inflation. Given all this—and despite resilient economic data so far this year—we expect one last rate hike in May.