Amid a global banking crisis, the US Fed announces a small rate increase

The US Federal Reserve raised interest rates by 0.25% due to recent volatility in the financial sector, resulting in higher borrowing costs for households and businesses.

Following this announcement, the markets fell sharply. The Dow Jones Industrial Average fell by over 500 points, or about 1.6%, at the closing bell. The NASDAQ and S&P 500 indices both declined and ended the day with about 1.6% each.

“The U.S. banking system is sound and resilient,” the Fed said in a statement after its latest policy meeting ended.

At the same time, the Fed warned that the upheaval stemming from the fall of two major banks is “likely to result in tighter credit conditions” and “weigh on economic activity, hiring and inflation.”

The Fed's rate-hiking campaign is nearing its conclusion as financial markets process the fallout from the banking crisis and the purchase of Credit Suisse by UBS.