Minutes from the Federal Open Market Committee (FOMC) were released on Wednesday, April 12. Following last month's banking turmoil, officials lowered their expectations for rate hikes this year, according to the minutes. The documents also included a presentation on the impact of the Silicon Valley Bank collapse. Michael Barr, Vice Chair for Supervision, noted that the banking sector is sound and resilient, but some economists think the economy will be adversely affected.
According to the shared documents, the U.S. banking crisis may plunge the economy into recession later this year. The officials expect a mild recession that will begin in late 2023 and a recovery over the next two years. They also expect gross domestic product to grow by only 0.4% for the entire year. The Atlanta Fed's forecast for growth of around 2.2% in the first quarter points to a decline later in the year.
Although a few policymakers considered whether to keep interest rates steady while waiting for the crisis to unfold, they decided to vote for another rate hike because of high inflation, the strength of recent economic data and the committee's aim to reduce inflation rate to its long-term target of 2%.
