Federal Reserve to Raise Interest Rates 25 Basis Points Amid Banking Crisis
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The Federal Reserve is expected to raise interest rates another 25 basis points – or 0.25% next week amid the banking crisis.
Two US banks failed in the last week after they were unable to produce enough cash for depositors.
Silicon Valley Bank and Signature Bank collapsed within the last week.
Moody’s cut the outlook for the entire US banking sector after the banks failed.
The banking crisis stems from the Federal Reserve’s decision to hike interest rates seven times in 2022.
Jerome Powell raised interest rates 450 basis points in 2022 to hedge inflation.
The rate hikes are crushing regional banks but the Fed is expected to raise interest rates again next week.
CNBC reported:
Even with turmoil in the banking industry and uncertainty ahead, the Federal Reserve likely will approve a quarter-percentage-point interest rate increase next week, according to market pricing and many Wall Street experts.
Rate expectations have been on a rapidly swinging pendulum over the past two weeks, varying from a half-point hike to holding the line and even at one point some talk that the Fed could cut rates.
However, a consensus has emerged that Fed Chairman Jerome Powell and his fellow central bankers will want to signal that while they are attuned to the financial sector upheaval, it’s important to continue the fight to bring down inflation.
That likely will take the form of a 0.25 percentage point, or 25 basis point, increase, accompanied by assurances that there’s no preset path ahead. The outlook could change depending on market behavior in the coming days, but the indication is for the Fed to hike.
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