Federal Reserve policymakers are said to be mulling a potential pause on interest rate hikes as the market is affected by a string of bank failures. Interest rates were expected to be raised in March by 50 basis points prior to the collapse of Silicon Valley bank two weeks ago Friday.
While some observers expect the Federal Reserve to still implement a diluted 25 basis point hike as inflation remains high, other expect the central bank to put a halt on hikes altogether when policymakers meet for a two-day policy meeting starting on Tuesday.
“The FOMC faces its most challenging policy decision in recent memory on March 22,” Bloomberg Economics observed. “Market expectations have shifted sharply — from a 50-basis-point hike to a pause — as fears of bank contagion displace inflation concerns. We expect the Fed to hike 25 basis points, taking the upper bound from 4.75% to 5%. Reaccelerating inflation maintains pressure to keep hiking.”
Over a dozen central banks are expected to set their own interest rate policies in the coming weeks, with economists predicting rate hikes coming out of the UK, Nigeria, Norway, the Phillipines, and Switzerland, while Brazil and Turkey are expected to pause.