US Fed Raises Interest Rates for the 9th Consecutive Time, Markets React with Caution


US: According to reports, With the recent failure of two US banks, the Federal Reserve increased interest rates on Wednesday by a quarter of a percentage point, but signalled it was about to halt further rises in borrowing costs.

Bank’s failure did not signal more significant flaws in the banking system

Fed Chair Jerome Powell assured investors that the banking system is sound and acknowledged that Silicon Valley Bank’s management “failed badly,” but added that the bank’s failure did not signal more significant flaws in the banking system and that the acquisition of Credit Suisse appeared to have been a positive development. The Fed stated that although it was “uncertain” how the banking crisis would affect the economy, inflation “remains elevated.” Powell’s statement that authorities were still committed to battling inflation but also assessing the extent to which recent bank failures had chilled demand and delayed lending caused Wall Street to end considerably lower despite this.

Silicon Valley Bank was shut down by California regulators

The benchmark interest rate for the US announced that it would increase by another quarter of a percentage point to a range of 4.75% to 5%, marking the ninth consecutive increase and the highest rate since 2007. The largest US bank failure since the 2008 financial crisis, Silicon Valley Bank was shut down by California regulators on March 10. This caused havoc in the banking industry. In response to investor concern over other ticking time bombs in the banking system, the Santa Clara, California-based bank and Signature Bank, another American midsized institution, went down. In order to prevent a wider disaster, UBS Group AG acquired the 167-year-old Credit Suisse Group AG. One of the causes of the greatest banking sector catastrophe since the 2008 financial crisis is the Fed’s unrelenting rate increases to control inflation.

Must Read: Is the US Banking System on the verge of collapse? Silicon Valley Bank files for Bankruptcy

Bank attempted to allay investor concerns

The most recent action to soothe tense regional bank stock prices occurred when Pacific Western Bank, one of the local lenders affected by market turbulence, announced it had received $1.4 billion from investment company Atlas SP Partners. Even though the bank attempted to allay investor concerns by stating that it has more than $11.4 billion in cash as of March 20, its shares ended the day down 17%. Yet Luke Ellis, the Head of hedge fund Man Group, claimed that the crisis was far from finished and foresaw further bank collapses less than two weeks after Silicon Valley Bank collapsed under the weight of bond-related losses brought on by rising interest rates.

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