Economists think Fed will keep raising rates despite bank turmoil

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A majority of leading academic economists polled by the Financial Times have stated that they believe that the Federal Reserve will continue to raise its benchmark policy rate and keep it above 5.5% for the rest of the year, despite turmoil across the US banking sector. The central bank still has work to do regarding inflation, even with the crisis among midsize lenders following the implosion of Silicon Valley Bank. Forty-nine per cent of economists surveyed between 15 and 17 March predicted that the federal funds rate would peak between 5.5% and 6% this year.  This is up from 18% in the previous survey in December, and compares to the rate’s current range of between 4.50% and 4.75%. Almost 70% of the respondents said they did not expect the Fed to deliver cuts before 2024. One of the panellists concluded the Fed and its regulatory counterparts had successfully contained the turmoil and warned against altering the tightening cycle. One ongoing debate is how significant a credit crunch is under way across the US as the regional banking sector seizes up.

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