Markets await the Fed’s decision after the collapse of a number of US banks
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The U.S. Federal Reserve is due to make a key decision on Wednesday on whether to continue a campaign to tighten monetary policy amid instability in the banking system following the collapse of a string of banks last week.
It is reported Financial Times, Bloomberg.
Amid the collapse of major US banks Silicon Valley Bank and Signature Bank, the Fed’s economic forecasts may have been revised, so policymakers are debating whether to raise rates by a quarter point or not at all.
At the beginning of the month, Powell expressed the idea that the Fed could accelerate the pace of rate hikes by half a point.
The rate decision will be accompanied by a revised set of forecasts for the further development of monetary policy until 2025, as well as forecasts for growth, unemployment and inflation.
According to the latest forecasts of the Fed, the rate on federal funds was supposed to reach a peak at the level of 5-5.25%. It is currently hovering around 4.50-4.75% after returning to a more traditional quarter-percent hike in February after several months of steeper increases.
Another quarter-point hike on Wednesday would lift the rate to a new target range of 4.75% to 5%.
The Fed’s decision is complicated by a lack of clarity about whether the world’s central banks have done enough to save the banking system from further spreading the crisis, as well as how severe the economic shock will be from the departure of medium-sized lenders.
European markets, awaiting the decision of the Fed, stopped the recovery observed since the beginning of the week. Instead, US indices continued to rise between 1-2% on hopes that the Fed would stop the cycle of rate hikes to fight inflation.
Read also: The world is panicking over the collapse of Silicon Valley Bank and fears a new financial crisis. Is everything so serious?
The collapse of Credit Suisse: how the 167-year-old Swiss bank went bankrupt in a week and why the US is “printing” dollars again
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