On Wednesday, March 22, the Federal Open Market Committee of the U.S. Federal Reserve held its second meeting in 2023. At the first meeting, the central bank boosted the short-term Fed Funds Rate by 25 basis points, pushing it to 4.50% to 4.75%. Between early February and the late March meeting, the markets began to experience some of the fallout of tight monetary policies. Rate hikes in 2022 and early 2023 and quantitative tightening at $95 billion monthly played a role in two U.S. bank failures. UBS had to take over Credit Suisse on the global landscape as the bank faced liquidity issues.
At the March 22 meeting, the Fed had two choices: continue to battle the highest inflation in four decades or pause to allow the previous rate hikes to filter through the economy. The latest inflation data favored at least another 25-basis point increase, while the bank turmoil was a reason for a pause.
