Fed raises interest rate to 5.75%

The benchmark interest rate was raised by a quarter of a point, forging ahead with its fight against stubborn inflation despite a spate of bank failures and a growing crisis within the financial sector.

The key federal funds rate is now at a range of 4.75% to 5%, the highest since 2007, from near zero a year ago. Policymakers said the banking system remains sound and resilient, but indicated that the rate increases are nearing an end and that future hikes will ultimately depend on forthcoming data reports.

The Committee will closely monitor incoming information and assess the implications for monetary policy, the Fed said in its post-meeting statement. The Committee expects that additional policy firming may be necessary in order to achieve a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. The Fed officials are in the midst of the most aggressive tightening campaign since the 1980s as they try to crush inflation that is still three times higher than the pre-pandemic average.

The Fed's efforts were complicated by the implosion of Silicon Valley Bank earlier in March, because the rapid rise in interest rates played a direct role in the bank's failures. The financial system could be worse off by increasing interest rates.

The new economic projections laid out after the meeting show that 17 out of the 18 officials who participated in the meeting expect rates to go up to 5.1% this year, which is just one more quarter-point increase. The U.S. central bank won't cut interest rates until 2024, according to the quarterly forecasts.

The jobless rate will be elevated in 2024 and 2025 as steeper rates will cause the U.S. to be at the brink of a recession, according to officials.

This is a developing story.