The Breakdown

At last week's meeting, the Fed decided to raise its benchmark interest rate, called the Fed Funds Rate, by 25 basis points. This brings the rate to a range of 5% to 5.25%. It's important to note that this rate is for overnight borrowing for banks and is not the same as mortgage rates, and that the Fed raises the Fed Funds Rate in order to slow the economy and combat inflation. This recent hike marks the Fed's tenth hike since March of last year.

Despite concerns about a recession, falling inflation, and the banking sector, the Fed's decision to hike the Fed Funds Rate was unanimous. Fed Chair Jerome Powell assured the public that the banking system is "sound and resilient." However, regional banks are under stress due to the rate hikes, and some have failed in recent months.

The Fed's policy statement also underwent a big change. The statement no longer includes language suggesting that further rate hikes will be needed. Instead, the Fed will determine whether additional firming policy is appropriate going forward. This could signal a pause in rate hikes at their next meeting in June, although Powell noted that no decision has been made yet. Powell also denied that the Fed would cut rates this year, despite some economists' predictions.

In other news, the housing market is showing signs of improvement. CoreLogic's Home Price Index indicates that home prices nationwide rose by 1.6% from February to March and were 3.1% higher compared to March of last year. Other appreciation reports by Case Shiller, the Federal Housing Finance Agency, Black Knight, and Zillow confirm that home prices are on the rise again.

Looking ahead, inflation will be a major topic of the week with April's Consumer Price Index being released today and the Producer Price Index will be released on Thursday. The National Federation of Independent Business reported the latest data on optimism among small businesses on Tuesday, while Jobless Claims will be released on Thursday. Stay tuned for next week's update!