The Federal Reserve hiked the interest rate to 5.25% yesterday evening, as expected, to tighten policy. Investors and researchers are wondering how future monetary policy moves would affect the US and global economy.

After raising the interest rate by 25 basis points, Federal Reserve Governor Jerome Powell stated the banking system is resilient and conditions have improved dramatically.

In response to journalists’ questions about the Fed’s future monetary policy, Powell said that he does not expect to cut interest rates in 2023 and that the Fed’s future policy cannot be determined. The Fed will raise interest rates again only if the US economy requires so, based on economic data and indicators.

Powell said the US labor market remains robust as the Federal Reserve has managed to slow down inflation without increasing unemployment or job losses.
Despite Powell’s confidence in the banking system and his statements to that effect, the share of Pacwest Bank declined by more than 50% after the possibility of its collapse increased, causing anxiety and recession fears despite evidence that the crisis is over.

Today, markets await a major risk event which is the ECB interest rate decision. After which Christine Lagarde, the President of the European Central Bank should appear in a press conference to provide latest updates on monetary policy in the Euro zone and answer questions from journalists.