Washington D.C. — The Federal Reserve has decided to pause interest rate hikes for June, today’s Federal Open Market Committee meeting confirms. The Fed has raised rates ten consecutive times over the last fourteen months, pushing the benchmark rate to over five percent — the highest it’s been in sixteen years.
The decision to pause rate increases comes in the wake of Silicon Valley Bank’s recent failure, raising concerns about wider financial stability risks. According to the Fed’s analysis, SVB’s collapse was caused by the banks’ failure to adequately “manage basic interest rate and liquidity risk.”
The decision also follows the May jobs report, which revealed a robust labor market with 339,000 new jobs created despite a 0.3% increase in the unemployment rate.
In response, Positive Money’s lead campaigner Akiksha Chatterji said:
“Although today’s pause in interest rate hikes is welcome, the reasons for the pause are not without concern. Under Chair Powell’s leadership, we’ve seen multiple bank failures, stemming from aggressive interest rate hikes combined with watered-down banking regulation.
When millions of jobs were on the line, the Fed was unwilling to pause rate hikes. But when the big banks break down, it immediately changes course. We need a Fed that works in the public interest, not one that is cozy with reckless, profiteering private banks that gamble with our economy.”
Notes:
- Board of Governors, “Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank”, April 28, 2023, https://www.federalreserve.gov/publications/files/svb-review-20230428.pdf
- U.S. Bureau of Labor Statistics, Employment Situation Summary, June 2, 2023, https://www.bls.gov/news.release/empsit.nr0.htm
- Federal Reserve FOMC Statement, June 14th, 2023 https://www.federalreserve.gov/monetarypolicy/files/monetary20230614a1.pdf
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