US Fed hikes interest rates by 25 basis points despite banking crisis

The US Federal Reserve raised its benchmark interest rate Wednesday by 25 basis points despite a banking crisis.

The Federal Open Market Committee (FOMC) unanimously decided to raise the target range for the federal funds rate to between 4.75% and 5%.

In seven hikes, the central bank raised the rate by 425 points last year followed by another 25 basis points Feb. 1.

Four US banks have rapidly gone under in recent weeks but the Fed said "the U.S. banking system is sound and resilient" in a post-meeting statement.

"Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain," it said.

Silvergate Bank, Silicon Valley Bank (SVB), Signature Bank and First Republic Bank have gone under within a matter of weeks, causing panic for Wall Street and investors, but most especially depositors.

Despite the recent fallout, the Fed said it is determined to bring down inflation to its goal of 2% to fight high prices.

Annual consumer inflation in the US came in at 6% in February, easing from 6.4% in January. The figure was the smallest 12-month increase since the period ending September 2021, while it marked a sharp decline from June's 9.1% yearly gain, the largest since November 1981.