‘Firefighter and policeman’: Fed faces rate rise dilemma amid banks turmoil

The US Federal Reserve must decide whether to implement another rate rise or forgo an increase amid uncertainty over efforts to shore up the banking sector. The dilemma comes as global authorities have acted swiftly to support the financial system in the wake of Silicon Valley Bank’s collapse.

March 22, 2023 . 9:40 AM

1 min read

Fed faces tough decision on whether to implement another quarter-point rate rise or forgo an increase amid uncertainty over efforts to shore up the banking sector.
Global authorities have acted swiftly to support the financial system in the wake of Silicon Valley Bank’s collapse, but it remains unclear whether these actions will be enough to stem the fallout from the crisis.
The share prices of most regional US banks are languishing well below the levels seen before the implosion of SVB, while First Republic Bank’s stock is still plummeting following a second downgrade of its credit rating on Sunday.
Further complicating the decision is that it will be accompanied by fresh projections not just for the trajectory of interest rates, but also for growth, inflation and unemployment, at a time when the economic situation is changing rapidly.
Economists are divided on whether the Fed should forgo a rate rise on Wednesday or continue with its aggressive campaign to curb persistent inflation in an effort to help stabilize the financial system.