The lightning collapse of three banks and financial industry rescue of a fourth has put a spotlight on the Federal Reserve’s decision next week over whether to continue raising interest rates.
Just two weeks after Fed Chair Jerome Powell suggested rates could rise even higher than previously projected in a bid to quash inflation, many analysts expect a no more than 0.25 percentage-point hike, while some experts are urging policy makers to hold the line for fear of further unsettling the banking system.
The quandary highlights the multiple, and conflicting, issues facing the Fed. With key sectors of the economy going strong and inflation still more than double the Fed’s target rate of 2%, the central bank is keenly aware that any sign it is relenting in the battle against inflation could give rise to another wave of price increases.
At the same time, lifting the federal funds rate now could magnify the kind of problems at other lenders that led panicked depositors to yank their money out of Silicon Valley Bank.
“A financial accident has happened, and we are going from no landing to a hard landing,” Torsten Slok, chief economist at private equity firm Apollo Global Management, said in a note this week that predicted the Fed will keep rates steady when officials meet March 21-22.
Read more at CBSnews.com
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