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WASHINGTON – The American central bank (Fed) opened its meeting on Tuesday with a stated desire to continue the fight against inflation, which is still well above target, amid turmoil in the banking sector.
A spokesman for the central bank told AFP that the meeting of the Monetary Policy Committee (FOMC) “started at 10:00 am as planned”.
Federal Reserve officials have made no secret of their need to continue raising rates, which have ranged between 4.75% and 5% in recent weeks, to keep pressure on prices and bring inflation back toward its 2% target.
However, according to the PCE index, which is taken into account by the Fed, inflation in March was still at 4.2%, though it eased. Moreover, core inflation, which excludes energy and food prices and is specifically monitored by the firm, stood at 4.7%.
Markets had expected an increase of at most a quarter point, or 25 basis points, but the decision will not be known until Wednesday and after Fed Chairman Jerome Powell’s press conference.
The meeting took place against an increasingly gloomy economic backdrop, with first-quarter growth slowing to just 0.3% from the previous quarter and 1.1% year-on-year.
Moreover, the possibility of a mild recession in the next two quarters is less and less likely for the majority of analysts who expect a recovery only in the last quarter of this year.
The new establishment, in an economic context marked by the bankruptcy of First Republic, was bought over the weekend by JPMorgan Chase, the number one in the sector, after federal authorities took control.
It is the third bank failure since mid-March, after Silicon Valley Bank (SVB) and Signature, but one of the largest in terms of regulated assets in American history.
Banking regulators concluded in two reports published on Friday that the failure of US institutions was linked to poor risk management due to deficiencies in their management and oversight.
But their fall was also due to the rapid increase in interest rates initiated by the US Central Bank (Fed) last year, which mechanically reduced the value of their fixed rate assets.