Update: On Wednesday afternoon, the U.S. Federal Open Market Committee decided to raise baseline interest rates to 4.75%-5%.
“The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation,” the FOMC’s statement read. “The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.”
Original story below.
On Wednesday, the U.S. Federal Open Market Committee is expected to decide if it will hike or lower the benchmark interest rate, something that’s been widely spoken about amid several major bank failures over the past few weeks.
Elon Musk took to Twitter to give commentary on billionaire hedge fund manager and investor Bill Ackman’s musings that the FOMC should consider a “temporary” pausing of interest rates, citing “a number of major shocks to the system” including the collapse of Silicon Valley Bank and the distressed sale of Credit Suisse to UBS.
“The effect of the above is a meaningful tightening of financial conditions that has not yet been visible in light of the rapidly unfolding events of the last two weeks,” Ackman wrote. “Inflation is still a problem and the Fed needs to continue to show resolve.”
Musk quipped back with a more extreme solution — dropping the baseline rate by 50 basis points.
Fed needs to drop the rate by at least 50bps on Wednesday
— Elon Musk (@elonmusk) March 21, 2023
Musk has been vocal about high and rising interest rates, sounding off in January about the Fed’s decision to lower interest rates in 2009 after the financial crisis of 2008.
“The higher the rates, the harder the fall,” he said bluntly.
In December, he accused the Federal Reserve of being the “real problem” behind Tesla’s falling market capitalization, something one of Musk’s followers deemed “wholly unacceptable.”
Tesla is executing better than ever!
We don’t control the Federal Reserve.
That is the real problem here.
— Elon Musk (@elonmusk) December 16, 2022
Federal Reserve Chairman Jerome Powell has made it known that the committee’s longstanding plan has been to continue to hike rates in the months ahead.
The current benchmark interest rate is set at 4.50% to 4.75% per the organization’s last hike in February.
Wednesday’s decision is expected to be announced by 2 p.m. EST.