But the bad news, he wrote, “is that further Fed tightening has the potential to worsen financial instability, threatening the economy with recession.” The good news in all of this, wrote JPMorgan chief global strategist David Kelly in a note on Monday, is that inflation appears to be on a well-established downward track. The question is whether the Fed’s fight against still-sticky inflation will further destabilize banks and how the central bank is analyzing that possible trade-off. When Silicon Valley Bank was forced to sell those bonds quickly at a substantial loss, the bank ran into a liquidity crisis and collapsed. That’s partially because the Federal Reserve’s rate hikes have undermined the value of Treasuries and other securities, a critical source of capital for most US banks. The US banking system is under a lot of pressure right now. Is the Fed’s fight against inflation destabilizing the banking system? Here are five big questions that he’ll likely face. Powell, the face of the mission, has no easy task ahead of him as he attempts to balance those three mandates while keeping a cool and reassuring facade. A policy rate announcement is expected on Wednesday along with new economic projections, and Federal Reserve Chair Jerome Powell will face the press to answer questions. The big question is what they’ll do next. This week, we’ll hear from Fed officials for the first time since the collapse of Silicon Valley Bank and Signature Bank, the sale of Credit Suisse and the lifeline extended to First Republic. ![]() The Federal Reserve has a lot of balls in the air: Central bank officials are attempting to juggle their economic goals of maximum employment and price stability while maintaining financial safety and security in the midst of a banking meltdown.
0 Comments
Leave a Reply. |