Last week, the European Central Bank pushed through a hefty hike to its key rate, despite speculation that it may ratchet back given all the banking woes. That in turn could mean less hiring and less economic activity, raising the risk of a recession that many economists already see as high. Since then, investors have been hunting for what bank may be next to fall, and regulators around the world have been trying to strengthen confidence in the industry.Ī worry is that too much pressure on the banking system, particularly among the smaller and mid-sized banks at the center of investors’ crosshairs, would mean fewer loans to companies across the country. Silicon Valley Bank also suffered from what’s called a bank run, where its customers began pulling money out at the same time in a debilitating cascade. Its bond investments fell in price as the Fed jacked up rates over the last year at the fastest pace in decades. That latter factor was one of the reasons for the collapse of Silicon Valley Bank two weeks ago. But they raise the risk of a recession later on, and they also hurt prices for stocks and other investments. Higher rates can undercut inflation by slowing the economy.

That helped to send yields slumping in the bond market, which has been home to some of the wildest action this month. That’s also the same level as seen in December, and it’s counter to worries in the market that it could rise given how stubborn high inflation has remained. The median forecast had the federal funds rate sitting at 5.1% at the end of this year, up only a smidge from where it currently sits, in a range of 4.75% to 5%. The Fed released the latest set of projections from its policy makers on where rates are heading in upcoming years.

There, the Fed gave a hint that it may not hike rates much more after Wednesday. The bigger question was where the Fed is heading next.

The move was exactly what Wall Street was expecting. The Fed raised its key overnight interest rate by a quarter of a percentage point, the same size as its last increase, in its campaign to drive down inflation. Eastern time, while the Nasdaq composite was 0.5% higher. The Dow Jones Industrial Average was down 6 points, or less than 0.1%, at 32,553, as of 2:30 p.m. The S&P 500 was 0.2% higher in afternoon trading.

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