'Banks reduce credit availability, consumers hold off large purchases, businesses defer spending. 'Financial crises create demand destruction,' Rosengren said on Twitter. 'They’d also risk sending a signal to the market that the macroeconomic impact of these microeconomic phenomena is worse than we think,' he said.įormer Boston Fed President Eric Rosengren took the opposite view.

'They need to keep up the fight on inflation to maintain credibility, and a pause here at these levels isn’t going to stop the bleeding in the markets.'Ī pause, he argued, risks undoing the work of the Fed's 4.5 percentage points of rate hikes since last March. 'I think they do indeed hike 25 bps next week,' said Jefferies' Thomas Simmons. economy.Īnalysts also sought to make sense of fast-moving events, including Friday's failure of Silicon Valley Bank, the creation over the weekend of an emergency Fed backstop for the banking sector, fresh data showing slow progress in the inflation fight, and a renewed banking stock swoon on Wednesday. Traders now see next week as a tossup between a smaller quarter-point hike and a pause, with rate cuts seen likely in following months as the turbulence at Credit Suisse renewed fears of a banking crisis that could cripple the U.S.

Traders moved to price in a half-point hike in the benchmark interest rate at the Fed's March 21-22 meeting, from its current 4.5%-4.75% range, and further rate hikes beyond. Its interest-rate-hike campaign in the face of persistent inflation. Read more: SVB collapse: A tale of ironies and what lies aheadĪnd it is all unfolding during the central bank's premeeting blackout period that prevents officials from offering public clarity on their assessment of the situation, and its effect on monetary policy decisions It was only last week that Powell signaled the central bank might accelerate

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