0 or 25bps: Will Fed Continue to Save Banks in FOMC meeting?
Fed will announce March rate hike decision on Wednesday.
Until now, the market has not fully priced in the rate hike by the Fed. According to the Fed Watch Tool provided by CME, the market expectation for no rate hike versus a 25 bps is approximately 30% and 70%, respectively.
This indicates that the market is eagerly anticipating the Fed to stop raising interest rates in order to save the banks.
source: cmegroup
1. Why does Fed need to save the banks?
- Bank Run - Inevitable Consequence of Aggressive Rate Hike
Even though the Fed and large banks have temporarily solved the liquidity problems, the short-term interest rate spread squeeze in the banking business will not be fundamentally solved.
The only solution is the Fed to begin a rate-cutting cycle.
As long as Fed continues to raise interest rates and yields continue to be inverted, more banks may face crisis like $SVB Financial Group(SIVB)$ and $First Republic Bank(FRC)$ in the future.
2. Why has Fed done to save the banks?
Fed announced Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks.
BTFP, however, has greatly offset the effect of its balance sheet reduction. This project allows banks facing liquidity pressures to obtain loans from the Fed by pledging their US Treasury and MBS that generate floating losses.
Fed’s balance sheet swelled by an impressive 300 billion in a week, close to half of the total balance sheet reduction scale of $625 billion since mid-April last year.
3. Will Fed continue to save banks and announce no rate hike in March?
1) Goldman Sachs chief economist Jan Hatzius said 0 bps
In light of recent stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March.
2) ECB raised interest rates by 50 bps as expected on March 16th, even as Credit Suisse faced a crisis.
3) In addition, the market generally expects a 25bps rate hike in March.
Conclusion
Market is eager to see how the Fed will choose between the mission of"resisting inflation" and the mission of"maintaining financial market stability" this Wednesday.
Do you think Fed will save banks or not?
Will Fed increase 0 or 25bps or others this Wednesday?
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🌟🌟🌟当谈到是拯救银行还是抑制高通胀的关键时刻时，我相信联邦政府会首先拯救银行。这是因为维持美国金融体系的健全是至为重要的。这是美国经济成功的基石，也是美国元成为世界上最强货币的基石。
我还认为，美联储甚至可能在本周暂时暂停利率，给银行一些喘息的空间，并为受到恐惧和最近银行挤兑蔓延困扰的市场恢复一些平静。
然而，这是购买摩根大通和美国银行等美国大银行股票的好时机，因为它们坚如磐石的资产负债表将更具弹性，因为它们将继续长期增长。
@Tiger_chat
如果我们这样看，那么美联储就接近其降低通胀的目标了。
但我认为美联储不会暂停加息，因为他们总是强调需要通胀数据来证明其行动的合理性。
银行业危机的影响将在接下来的几周和几个月内显现出来。这意味着我们可以在2023年5月初的后续决定中看到利率暂停/小幅上调，但不是明天发生的那次。
don't you agree @Viv22 @LMSunshine @KYHBKO @Tigress02 @Universe宇宙 @kungpao @wine18 @cindyft @Xian789 @MTok
@CT888 @Kiyosumi @SR050321 @Sglim73 @AnthonyVes @HelenJanet @VinkaloZendo come n join in the discussion.
一勞永逸地，扼殺通貨膨脹，引發衰退，擺脫所有疲軟的銀行。
二月會對三月底出色完成的工作感到滿意！！[邪惡]