![]() Analysts think policymakers "need to tread carefully" from here in their efforts to "hose down inflation," the paper added. Some economists blamed the Fed's "most aggressive rate-rising cycle in decades" for SVB's collapse in the first place. Bank stocks fell, and government bond prices rose "as fund managers ramped up bets" that rates wouldn't change after the March meeting, Financial Times said. The surprising collapse of SVB threw everything up in the air. The major indexes each fell more than 1 percent. Beyond stocks selling off, "Treasury yields rose and the dollar extended again after Powell's comments," Reuters reported. For example, when Fed chairman Jerome Powell signaled in early March that further interest rate hikes were likely, the market went into a bit of a tailspin. Rate changes usually take "at least 12 months" to have "widespread economic impact," Investopedia explained. The agency doesn't actually set the funds rate - banks do that - but "the Fed assumes that banks will use it as a floor in their own lending," Forbes added. Lowering rates stimulates the economy raising rates slows the economy down. The Fed uses interest rates "like a gas pedal and a brake pedal," Forbes explained. After Powell initially called the June pause a "skip," which The Associated Press noted "would imply that the Fed planned to raise rates at the July meeting," it said he "corrected himself." How do interest rates affect the economy? It isn't clear if rate hikes will resume then or if the Fed will wait a bit longer. The Federal Reserve is next set to meet on July 25-26. It's just the idea that we're trying to get this right," Powell said. ![]() "Given how far we have come, it may make sense for rates to move higher but at a more moderate pace. That said, Powell did indicate after the June meeting that the Fed wants to move at a less aggressive pace going forward when it comes to rate hikes. However, just two policymakers believed that rates would stay where they were through the end of the year. ![]() Others were less aggressive in their forecasts, only predicting a single quarter-point hike. Projections from Federal Reserve policymakers showed that there could be up to two additional rate hikes of a quarter-point each before 2023 comes to an end. After this hiatus, further rate hikes may be back on the table. ![]()
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