Photo by Etienne Martin on Unsplash

Speaking at a Fed conference on Friday, May 19th, Chair Jerome Powell stated that further rate hikes may not be needed. He also remarked, however, that any future decisions will be made on a case-by-case basis and warned that the outcome of the June meeting is still unclear.

Powell Says That Further Rate Hikes May Not Be Needed

This Friday, Jerome Powell, the Federal Reserve Chair, stated that the current situation in the economy, following a year-long aggressive fight against inflation, offers an opportunity to ease the pressure and assess the effects of the policy decisions that have already been reached.

Powell also stated that further rate hikes may not be needed but also warned that the Fed will keep making decisions meeting by meeting. Despite saying that further increases may ultimately not be needed and warned that the June decision remains “unclear”.

The Fed has been on an aggressive rate hiking spree for just over a year in response to record-high inflation. Since last March, there have been 10 consecutive increases, and the latest one was announced in May and amounted to 25 BPS. In total, the target range increased from 0-0.25% to 5-5.25%.

Rate Hikes Managed To Cool Inflation to Under 5% by April

While still relatively distant from the target inflation rate of 2%, Fed’s policy did bring noticeable results. The latest CPI print showed that inflation slowed down significantly from last summer’s high of 9.1% and is now down to 4.9%.

The policy has, however, sparked several unfavorable events. The most dramatic and prominent of these has been a crisis of American regional banks that started in earnest at the beginning of March. So far, it has claimed three banks—Silicon Valley, Signature, and First Republic.

Additionally, Treasury Secretary Janet Yellen warned on May 19th that more bank mergers may be needed before the crisis is over. Digital assets, however, have proven to be unexpected winners of the crisis with Bitcoin rising 62% since the start of the year, and cryptocurrency-related stocks like Coinbase and MicroStrategy performing in a similar fashion.

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