The Fed hiked their benchmark Fed Funds Rate by 25 basis points at their meeting last Wednesday, bringing it to a range of 5% to 5.25%. The Fed Funds Rate is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates. When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb inflation. This was the Fed’s tenth hike since March of last year.

What’s the bottom line? The Fed’s decision to hike the Fed Funds Rate was unanimous, despite clear signs of falling inflation, forecasts of a recession, and concerns about the banking sector. And while Fed Chair Jerome Powell stressed that the banking system is “sound and resilient,” one result of the Fed’s rate hikes is the stress they have put on many regional banks. Depositors have been incented to withdraw their money and invest it in higher-yielding money market accounts or short-term treasuries. Over the last two months, three banks with a combined $550 billion in assets have failed, which is 50% more than the 511 banks that have failed since 2009. The stability of regional banks is crucial, as they make up almost 40% of all loans.

There was also a big change to the Fed’s policy statement, which saw the removal of language saying they “anticipate” further rate hikes would be needed. Instead, the Fed said that going forward they would determine whether additional firming policy would be appropriate. This lays the groundwork for a pause in rate hikes at their next meeting in June, although Powell noted in his press conference that the Fed has not made that decision as of yet. He also denied the Fed would cut rates this year even though economists forecast otherwise.