Faced with both high inflation and turmoil in the United States banking system, the Federal Reserve raised its Fed funds rate by 25 basis points on Wednesday to a target range of 4.75 per cent to 5 per cent. But even by its own admission, the future course of interest rates remains highly uncertain.

Up to the first week of March, the Fed had signalled its determination to hike interest rates aggressively to quell inflation, which was running at 6 per cent in February for consumer prices. But two mid-sized bank failures in less than a week – of Silicon Valley Bank (SVB) and Signature Bank – and the threat of more to come have changed its calculus. This was clearly reflected in the statement by the Fed’s monetary policy committee, which dropped previous references to the need for ongoing rate increases.