Tenth Rate Hike

The Federal Reserve yesterday approved a 0.25 percentage point interest rate hike, bringing its benchmark federal funds rate to a range between 5% and 5.25%—the highest since 2007. The rate sets what banks charge each other for overnight loans and affects borrowing costs for consumers, including for mortgages, auto loans, and credit cards (see 101).

The Fed also released a revised policy statement yesterday, which cut a phrase from a previous version in March that said the committee anticipated additional policy increases to achieve its 2% inflation goal. Observers say the omission signals the Fed may be mulling the last of its rate increases.

The 10th rate hike comes amid pressure on the US banking industry following the historic collapse of three midsized banks since March. Analysts say the Fed's tightening over the last year may exacerbate banking issues after fueling losses at institutions heavily invested in bonds sensitive to interest rates.