The Federal Reserve raises interest rates another quarter of a point despite bank failures and the debt ceiling crisis

The Federal Reserve announced another 0.25 percentage point interest rate hike on Wednesday, the tenth since March last year, which will bring benchmark rates to 5% to 5.25%, the highest level in 16 years.

This increase coincides with the forecasts of financial experts and the markets, who are now analyzing the message from the monetary authorities to conclude if they will now pause the increases, according to CNBC.

“The most important thing is how they convey the possibility of a pause in the future,” said Collin Martin, Charles Schwab strategist.

“How do they do it and at the same time leave the door a little open?

That will be a balancing act between suggesting a pause is in the cards but still depending on incoming data should inflation turn higher in the future,” he added.

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The Federal Reserve is facing two conflicting economic trends.

On the one hand,

and political battles over the debt ceiling could weaken the economy if banks tighten lending and financial markets fall on fears of a debt default.

These fears would discourage further interest rate hikes, at least for now, according to The Associated Press news agency.

On the other hand,

although it is slowing down, is still at a level well above the target set by the bank to make credit even more expensive to curb price increases.

That would drive up the cost of mortgages, car loans and credit cards, further raising the risk of an economic downturn.

The consumer price index (CPI) has fallen as the price of gasoline and other goods has fallen, but core inflation (which excludes food and energy costs, which are volatile) has remained chronically high.

According to the Federal Reserve's preferred gauge, core inflation rose 4.6% in March from a year earlier.

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The Federal Reserve must weigh at least two variables.

One is the intervention of First Republic Bank and its sale to JPMorgan Chase, the third financial failure since March.

The other is the

that seems to be getting closer: the US economy slowed down sharply in the first quarter of the year (it grew at a rate of 1.1% compared to 2.6% in the previous quarter).

Economists at the firm Goldman Sachs expect the Federal Reserve to change the language of the post-meeting statement, signaling that change is coming, according to CNBC.

“We expect the Committee to signal that it anticipates a pause in June, but maintains a 'hawk bias', pausing earlier than initially anticipated because banking stress is likely to cause credit tightening,” said analyst David Mericle.

A "hawk bias" means that Fed policy makers will insist that rates remain tight even if no further hikes are on the way.