Federal Reserve delivers small rate hike amid recent financial turmoil in U.S.

The Federal Reserve raised interest rates by a quarter of a percentage point on March 22 amid recent turmoil in financial markets spurred by the collapse of two U.S. banks, Silicon Valley Bank (SVB) and Signature Bank.

The Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets spurred by the collapse of two U.S. banks.

The move set the U.S. central bank's benchmark overnight interest rate in the 4.75%-5.00% range, with updated projections showing 10 of 18 Fed policymakers still expect rates to rise another quarter of a percentage point by the end of this year, the same endpoint seen in the December projections.

But in a key shift driven by the sudden failures this month of Silicon Valley Bank (SVB) and Signature Bank, the Fed's latest policy statement no longer says that "ongoing increases" in rates will likely be appropriate. That language had been in every policy statement since the March 16, 2022 decision to start the rate hiking cycle.

Instead, the policy-setting Federal Open Market Committee said only that "some additional policy firming may be appropriate," leaving open the chance that one more quarter-of-a-percentage-point rate increase, perhaps at the Fed's next meeting, would represent at least an initial stopping point for the rate hikes.

Though the policy statement said the U.S. banking system is "sound and resilient," it also noted that recent stress in the banking sector is "likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation."

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There were no dissents on the policy decision.