Silicon Valley Bank collapse that shook the world reveal cracks emerging in the system
“Amid the rapid-fire rate hikes of the past year, many financial commentators were steadily looking for any cracks to emerge, as almost inevitably happens amid every serious monetary tightening cycle,” said BMO chief economist Douglas Porter.
Fed funds futures reacted quickly to news of the bank’s failure, betting it would spur the Federal Reserve to pull back. Markets on March 10 were predicting a lower peak to Fed hiking and rate cuts later this year.Article content “It is a timely reminder that when the Fed is singularly focused on squeezing inflation by jacking up interest rates – it often ends up breaking things,” wrote Ashworth.
Capital still considers a “softish” landing the most likely outcome, but it acknowledges risks to their view are mounting. The chance of a severe recession is now much higher that the risk of “no landing” where the economy and financial markets continue to shrug off the impact of higher rates, Ashworth said.First whether authorities can maintain the confidence of depositors and investors in the U.S. banking system.
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