i Capital has said for some time that the US economy is heading for a serious recession this year. The prediction looks like coming to pass soon following the collapse of Silicon Valley Bank (SVB) last week. This is the largest US banking failure since the 2008 US-led financial crisis and the second largest in US history. The sudden collapse of SVB spooked customers of other regional banks. Within days, bank runs led to the failure of New York-based Signature Bank, the third largest in US history. Although the US Federal Reserve, the Federal Deposit Insurance Corporation, and the Treasury Department stepped in try to contain the contagion, the situation remains very nervous.
The Federal Reserve’s aggressive interest rate hikes are beginning to bite. With the US economy remaining overheated, will the Fed continue its tightening drive? When the Federal Reserve starts to raise interest rates, it generally keeps doing so until something breaks. Will the second and third largest bank failures be enough to put a stop to the central bank’s battle against inflation ? Next week's FOMC meeting may not provide the final answer.
The Federal Reserve’s aggressive interest rate hikes are beginning to bite. With the US economy remaining overheated, will the Fed continue its tightening drive? When the Federal Reserve starts to raise interest rates, it generally keeps doing so until something breaks. Will the second and third largest bank failures be enough to put a stop to the central bank’s battle against inflation ? Next week's FOMC meeting may not provide the final answer.
