The Federal Reserve raised its key interest rate by a quarter-point, continuing its year-long fight against high inflation despite concerns of worsening banking system turmoil. The Fed, however, assured that the US banking system is sound and resilient but warned that the recent financial upheaval following the collapse of two major banks is likely to result in tighter credit conditions and weigh on economic activity, hiring, and inflation. Fed Chair Jerome Powell said that getting inflation back down to 2% still has a long way to go, and is likely to be bumpy. Nevertheless, the Fed signaled that it may be nearing the end of its aggressive streak of rate hikes, and expects to raise their key rate just once more from its new level of about 4.9% to 5.1%. The Fed’s latest decision reflects an abrupt shift, as Powell had earlier announced the possibility of raising its rate by a substantial half-point. However, banking system turmoil and increased chances of imperiling weaker banks led the Fed to opt for a quarter-point hike.

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