It was smaller than it has been, but the Federal Reserve has once again raised key federal interest rates.
The Fed announced Wednesday it was raising key federal funds rate by 0.25% in its continuing battle to fight inflation.
The 0.25% was the smallest hike to come since the Fed started using this strategy, with almost-monthly increases, last March. In its statement on Wednesday, the Fed indicated more rate increases are likely.
A Bloomberg index shows financial conditions in the U.S. have eased to their loosest level since last February, according to a report from NBC News, meaning it is becoming easier to borrow money and sell goods again.
That’s reflected in declining average mortgage rates, which have fallen back to 6.13% after having hit a high of 7.08% in November, the network reported.
In addition, rising prices of commodities like oil, as well as a weakening U.S. dollar and improvement in the performance in the stock market, have all contributed to some cautious optimism about the economy, according to the NBC report.
For now, economists are saying that recession fears should be lessened, but that if a recesssion comes later this year, it should be a mild one.
“Most of the sources of inflation in 2022 have started to look better now,” Bill Adams, the chief economist for Comerica, told Corp! Magazine. “We’ve seen consumer spending growing more slowly, and the gap between consumer demand on the one hand versus businesses’ ability to provide goods and services is less imbalanced.”
Others are downplaying fears of a recession.
“The Fed is staring down the barrel of an upturn in economic activity,” Neil Dutta, the head of U.S. economics at Renaissance Macro financial group, wrote in a recent note to clients, according to NBC. A 0.25% interest rate hike may end up proving too small, Dutta said — with the risk that the Fed will have to return to a stricter policy later. “The Fed’s story only works if the economy is slowing down. Sorry, but I don’t see it.”
