Bank turmoil led Fed officials to forecast fewer rate hikes

By CHRISTOPHER RUGABER
AP Economics Writer

WASHINGTON (AP) — Turmoil in the banking system after two major banks collapsed led many Federal Reserve officials to envision fewer rate increases this year out of concern that banks will reduce their lending and weaken the economy. The heightened uncertainty surrounding the banking sector also helped Fed officials coalesce around their decision to raise their benchmark rate by just a quarter-point, rather than a half-point, despite signs that inflation was still too hot, according to minutes of the Fed’s March 22-23 meeting. The Fed also revealed Wednesday that its staff economists have forecast that a pullback in lending resulting from the banking turmoil will cause a “mild recession” starting later this year.