In view of the recent ‘mini banking crisis’ – will the Feds fight with inflation mean U.S. interest rates will still go up this month?
Two or three more increases of 0.25%?
Markets still expect the Fed to keep up its inflation fight, despite recent bank failures that have unexpectedly rocked the financial system.
Traders have now assigned an 85% chance of a 0.25% interest rate increase when the Federal Open Market Committee meets 21st – 22nd March 2023
However, Goldman Sachs is reported to have said that it expects the central bank will not put rates up up next week.
It is true that when the Federal Reserve starts to raise interest rates, it’s a general understanding in Wall Street that it just keeps going until it breaks.
So with the third and second biggest bank failures since the financial crisis of 2008 ever, happening in just the past few days, and worries of more to come, that would seem to suggest the Fed may keep going.
If the Fed decides to keep increasing rates in its fight against inflation during this banking crisis, it truly may just break something – not least the economy.
After all, you may recall the Fed originally indicated in the early days that inflation was ‘transitory’. If that is the case, it is very much a long transition.
I hope it will miss this one increase in March. Let’s see what the data says.