'As the saying goes, the Federal Reserve usually raises interest rates until something breaks. After one year and 450 basis points of tightening, something has finally broken,' TianaTheFirst writes.
Despite the federal government's bailout of Silicon Valley Bank depositors, which Treasury Secretary Janet Yellen asserted was done to minimize the risk of financial contagion, investors are clamoring for the Fed to halt monetary tightening.
Burns's bailout of the Bank of the Commonwealth"occurred between the 1969-70 and the 1973-75 recessions, at a time when inflationary pressures appeared to be abating," Ferguson wrote."Consumer price inflation had come down from a high of 6.4% in February 1970 to below 3.3% at the end of 1971. Although inflation rose back to nearly 3.8% in February 1972, however, the Burns Fed held the discount rate steady at 4.5%, down from 5% in October 1971.
The easiest way to square the circle is, after his show of flexibility both in the SVB depositor bailout and in liquidity swaps to other central banks, to go forward with a 50 basis point hike this Wednesday. — Genevieve Roch-Decter, CFA March 16, 2023 Raising interest rates while expanding its balance sheet may sound a bit like pressing the gas pedal and the brake at the same time. But in effect, that would allow Powell to pursue financial stability, mitigating the risk of further bank runs and collapses, at the same time as price stability.
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