US Fed: Another Rate Hike Coming Amid Banking Crisis?

  • Market Overview
Aayush Khanna/Investing.com - Investing.com

Today is an important day for the global financial markets as the US Fed would conclude its 2-day FOMC with yet another rate hike . The Fed is continuing to face a growing challenge to strike a balance between curbing inflation and at the same time, delivering the least possible damage to the US economy.

The spotlight on the regional US banks in the recent past (Silicon Valley Bank and Signature Bank) amid their complete collapse would surely not go unnoticed in the upcoming decision. The banks alone are not facing the trouble of falling bond prices but insurance firms also have mammoth holdings in government bonds which are also bleeding. The relentless rate hikes since the last one year have taken a toll on the value of existing long-term maturity bonds which has started to impact these financial institutions. These 2 incidents should have been enough for Jerome Powell to pause rate hikes, however, currently, inflation seems to be the higher priority for central banks around the world.

Recently, the ECB (European Central Bank) showed no mercy on the current fragility of institutions with long-term bonds in their portfolio and went on with an aggressive 50 bps hike. The markets were expecting a 25 bps hike, especially after the failure of Credit Suisse (SIX: CSGN ), which led Swiss regulators to intervene to save the bank.

Although the US CPI has consistently been falling, with the latest reported jump of 6% YoY in February 2023, noticeably lower than the peak of 9.1% in June 2022, as per the Fed’s testimony, the stronger-than-expected economic indicators might force it to keep moving in the direction of rate hikes. In fact, the recent YoY inflation number in the UK surprised the market with an uptick to 10.4% for February 2023, from 10.1% in the previous month. In India as well, when everything was looking to come under control with CPI falling to a 12-month low of 5.72% in December 2022, it suddenly jumped to a 3-month high of 6.52% in January 2023.

The US Fed would surely not want to leave its job unfinished midway. It seems like a 25 bps rate hike is on the cards which is almost discounted in the market. In case a bigger hike comes, that might lead to a fall in equities. However, more important than the rate hike, Jerome Powell’s commentary would be extremely crucial to decide the future trajectory of the markets.

Read More: Trading 101: How to Improve Your Psychological Resilience!

Add Chart to Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
Please try another search
  • S Kar @S Kar
    do not read Aayush's column
    Like 0
    • Akash Omar @Akash Omar
      f off
      Like 0

      • Comment Guidelines

      We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

      • Enrich the conversation
      • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
      • Be respectful. Even negative opinions can be framed positively and diplomatically.
      •  Use standard writing style. Include punctuation and upper and lower cases.
      • NOTE: Spam and/or promotional messages and links within a comment will be removed
      • Avoid profanity, slander or personal attacks directed at an author or another user.
      • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
      • Only English comments will be allowed.

      Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

      Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
      Please try another search
  • Sanjeev Nikalje @Sanjeev Nikalje
    then what is the conclusion?
    Like 3
  • rafwth brahma @rafwth brahma
    today's event is gonna be a non event...Fed kuch -ve bolega to +ve bhi bolke jaayega... likh lena meri baat
    Like 2
  • Radhe Radhe @Radhe Radhe
    in this what come to the conclusion???? nothing this all we know ..u should say your judgement.
    Like 3
    • Radhe Radhe @Radhe Radhe
      good
      Like 0

      • Comment Guidelines

      We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

      • Enrich the conversation
      • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
      • Be respectful. Even negative opinions can be framed positively and diplomatically.
      •  Use standard writing style. Include punctuation and upper and lower cases.
      • NOTE: Spam and/or promotional messages and links within a comment will be removed
      • Avoid profanity, slander or personal attacks directed at an author or another user.
      • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
      • Only English comments will be allowed.

      Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

      Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
      Please try another search
  • Balasubramanian R @Balasubramanian R
    interest rate and bank details
    Like 0

Related Articles