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With the objective of keeping inflation at bay, everything indicates that during your next meeting the members of the Federal Reserve will approve an increase in the interest rate.
On Wall Street, most analysts are convinced that the Fed will continue to implement its policy of doing what is necessary so that inflation does not skyrocket, even if this implies encouraging the probability of entering a recession.
According to data released by CME Group until the close of operations of the financial system on Friday, there was a 75% probability that the Fed would be inclined to increase the interest rate by a quarter point, which for some economists could be counterproductive.
About, Mark Zandi, chief economist at Moody’s Analytics, noted In an interview granted to CNBC, that a new increase in the midst of the turbulence in the banking sector is not the most appropriate at the moment.
“They definitely shouldn’t toughen up the policy. People are really on the edge, and any little thing could push them further, so I just don’t get it. Why can’t you switch up a bit here and focus on financial stability? You are not going to lose your battle against inflation with a pause. However, you could lose the financial system”he expressed.
There’s a debate over whether the Federal Reserve should raise rates when it meets this coming week. It’s hard to fathom it would. How can it square going from hurriedly erecting a credit facility for banks struggling to pay depositors this past week with rising rates next week? pic.twitter.com/SwN36hsBgU
— Mark Zandi (@Markzandi) March 18, 2023
For his part, Michael Gapen, an economist at Bank of America, is among the few who expect a looser stance from the Fed. especially after it granted $164.800 million dollars in loans payable in one year, this through the Bank Term Funding Program, a loan plan aimed at financial institutions that require it in order to have enough money to fund their operations.
“Events continue to be fluid and other stress events could materialize between now and next Wednesday, which would lead the Fed to pause its rate hike cycle.” he pointed out through a note addressed to his clients.
Goldman Sachs also forecasts that the Fed will maintain the interest rate You want to prevent banking stress from getting worse, which is not healthy at all right now.
In this way, the behavior shown by the financial sector at the start of the week could be decisive in the position that the Fed will assume.
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