The Federal Reserve's current cycle of interest rate hikes is about to end soon, as a result of the dramatic implosion of Silicon Valley Bank SVB last week, according to WASHINGTON.
Some traders and analysts now believe that the Fed will increase the pace of hikes to tackle inflation, but they have now dialled back their expectations, with some saying that the US central bank will hold its benchmark next week due to the troubles in the banking sector.
The collapse of the SVB and New York-based Signature Bank last week was the biggest banking failure since the 2008 global financial crisis.
It left the Federal Open Market CommitteeFederal Open Market Committee FOMC in an unenviable position as it seeks to tackle above-target inflation and hot economic data without adding to the ongoing rout of some banking stocks.
Analysts at Goldman Sachs and Wells Fargo predict the Fed will end its hiking cycle on Mar 22, while economists at JP Morgan and Oxford Economics think the FOMC will vote for a smaller quarter-percentage hike.
America's top finance officials unveiled a series of measures over the weekend aimed at restoring confidence in the banking sector and settling turbulent markets.
The Treasury, the Fed and Federal Deposit Insurance Corporation have plans to allow SVB's customers to access all their deposits in the bank.
The Signature Bank would be made whole, according to a joint statement on Sunday.
A new lending tool was introduced by the Federal Reserve to try and prevent a repeat of SVB's collapse, when a bad financial report caused customers to withdraw their funds, causing a liquidity crisis.
President Joe Biden said on Monday that while the US is trying to protect customers' deposits, it won't be bailing out the bank's investors.
They knowingly took a risk and when the risks didn't pay off, investors lost their money. That's how capitalism works, he said.