Did SVB break the Fed? Officials mull risks of more rate increases

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The suddenly urgent question is whether the level of pressure on the banking industry has become so great it risks a larger financial crisis and warrants a slowdown or pause to further rate increases.

Economists and investors so far expect the Fed to proceed with another quarter-point interest rate increase at its meeting from Tuesday to Wednesday, March 21 to 22, but only becausepolicymakers won’t want to divert from efforts to control it. The financial system, meanwhile, has been thrown extra support under a new Fed lending program for banks, while its traditional lender-of-last-resort cash window was tapped for a record $150 billion.

The Fed’s policy statement will be released Wednesday at 2 pm along with closely watched projections from officials for the policy rate at year’s end, perhaps the best clue to how recent financial stress has reshaped the Fed’s outlook.History lesson, the Fed over the past 12 months increased rates at the fastest pace since former Fed chair Paul Volcker faced an even worse outbreak of hot prices.

a month, was evidence rates needed to move higher still. Because nothing had “broken” in the economy, further rate increases were seen as cost-free., but more broadly in the perception that the system might not be as stable as Fed officials have felt in the years since regulatory reforms forced financial firms to better buffer themselves.long-term government bonds

 

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Pressure? Like lending money with no capital assets to cover it? What could possibly go wrong?

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