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 uncertainty stemming from the banking sector also helped Fed officials coalesce around their decision to raise their benchmark rate by just a quarter-point, rather than a larger hike, despite signs that inflation was still running too high, according to minutes of the Fed’s March 22-23 meeting. Overall, the minutes showed that the banking troubles inserted enormous uncertainty into the Fed’s decision, and reversed an emerging trend to raise rates even higher to quell inflation.