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The Federal Reserve raised the target range for its benchmark interest rate by 0.25% on Wednesday as it battles stubborn inflation and a banking crisis which has pushed the central bank into taking its most significant emergency actions since the onset of the pandemic.

The rate hike brings the Fed's policy rate, the federal funds rate, to a new range of 4.75%-5%, the highest since October 2007.

The Federal Reserve hiked interest rates by 0.25 percentage points on Wednesday after numerous failures in the banking sector had prompted some analysts on Wall Street to call for a pause.

The quarter-point hike is the ninth consecutive rate increase by the Fed since March of last year as part of the U.S. central bank’s program of quantitative tightening undertaken in response to high inflation. The Fed’s baseline interest rate range is now set to 4.75 to 5 percent.

The Federal Reserve on Wednesday raised its benchmark interest rate by a quarter of a point, forging ahead with its fight against stubborn inflation despite a spate of bank failures and a growing crisis within the financial sector. 

The unanimous decision puts the key benchmark federal funds rate at a range of 4.75% to 5%, the highest since 2007, from near zero just one year ago. It marks the ninth consecutive rate increase, following a half-point hike in December and four jumbo-sized 75-basis-point hikes before that.

The failure of two U.S. banks in recent days poses a test of confidence – and of regulatory reassurance – at a time when the economy is already challenged by inflation and rising interest rates.

The failure of two U.S. banks within the past week does not constitute a banking crisis. Instead, it’s a worrying spark of fear that has been spreading. Consumers wonder whether their money is safe.

Some small businesses, especially tech startups, are scrambling to find new banks that can meet their needs such as making payroll.