Focus at Four: Texas A&M economist breaks down Fed’s latest rate hike

COLLEGE STATION, Texas (KBTX) - The Federal Reserve extended its year-long fight against high inflation Wednesday by raising its key interest rate by a quarter-point despite concerns that higher borrowing rates could worsen the turmoil that has gripped the banking system.

Fed Chair Jerome Powell sought to reassure Americans that it is safe to leave money in their banks, two weeks after a rush of depositors pulled funds from Silicon Valley Bank, which collapsed in the second-biggest bank failure in U.S. history. Signature Bank fell soon afterward.

“We have the tools to protect depositors when there’s a threat of serious harm to the economy or to the financial system,” Powell said. “Depositors should assume that their deposits are safe.”

With Wednesday’s hike, the Fed’s benchmark short-term rate has reached its highest level in 16 years.

Dennis Jansen, the Director of the Private Enterprise Research Center, joined First News at Four to break down the Fed’s decision.

“The inflation rate’s been running at 6% year over year,” said Jansen. “Since June, the Fed assumed it would continue at that rate until today, for the next four months or a year. The inflation rate would be running more like 3.5%.”

Jansen said these interest rate hikes may have had some positive impact but the target rate of inflation is 2%.

You can watch our full interview from First News at Four in the video player above.

Copyright 2023 KBTX. All rights reserved.