The Federal Open Market Committee announced today would increase the target range for the federal funds rate by 25 basis points to 5% to 5.25%. The decision marked the tenth consecutive increase. However, the FOMC did not indicate whether members believe further hikes would be necessary, unlike previous meetings where they suggested further rate hikes were possible.

“The US banking system is strong and resilient,” the FOMC said in a statement. “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation. The extent of these effects remains uncertain.”

The FOMC last voted to raise rates in March, less than two weeks after the failures of Silicon Valley Bank and Signature Bank. The committee noted in yesterday’s statement that economic activity expanded at a modest pace in the first quarter of 2023. It also said that job creation has been strong in recent months, the unemployment rate has remained low and the inflation remains high.

Powell: Fed seeks to learn from SVB shutdown

The Federal Reserve is committed to learning the correct lessons from the recent bank failures, “and we will work to prevent events like these from happening again,” said Fed Chairman Jerome Powell. Speaking to reporters after the announcement of the FOMC’s decision to raise the federal funds rate, Powell pointed to a recent report by the agency that found flaws in its monitoring of SVB in the months leading up to the bank’s closure.

“The review’s findings underscore the need to address our supervisory rules and practices for a stronger and more resilient banking system, and I am confident we will do so,” Powell said.

Among its findings, the report by Fed vice president for supervision Michael Barr pointed to previously adopted tailored regulatory standards that he said impeded effective supervision, while acknowledging that, in the case of SVB, “more Stringent regulations may not have prevented the company from failing.” Powell said he found the argument that stronger oversight would be needed in the future persuasive. Still, the chairman said his focus remains on what went wrong with SVB.

“It may have just been the evolution of technology, we have to keep up with all of that, but part of that may be down to our policies, supervisory and regulatory,” he said. “Our job now is to identify those things and implement them… I feel like I’m responsible for doing everything I can to make sure that happens.”

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