Bank troubles come amid high inflation, Fed's dilemma for raising rates

　　Chinanews.com, March 15 (CNBC) reported that the U.S. Department of Labor released a report on the 14th that the consumer price index (CPI) in February rose by 0.4% month-on-month and 6% year-on-year.

Both figures were in line with market consensus expectations.

　　The CPI, which measures goods and services, is reported to be one of several key indicators used by the Federal Reserve when setting monetary policy.

The report, along with producer price index (PPI) data released on the 15th, will be the last two inflation-related data U.S. policymakers will see ahead of the March 21-22 monetary policy meeting.

　　Ahead of the data, the Fed was widely expected to approve a further 0.25% increase in its benchmark federal funds rate.

On March 13, local time, customers waited in line in front of the headquarters of Silicon Valley Bank in Santa Clara, California, to handle business.

Photo by China News Agency reporter Liu Guanguan

　　However, the turmoil in the US banking sector in recent days seems to illustrate the impact of a series of austerity measures over the past year.

This makes analysts generally believe that the Fed may soon send a signal to stop raising interest rates.

　　According to the latest forecast of the financial market on the morning of the 14th, the peak of this round of interest rate hikes will be 4.95%; if this forecast comes true, it means that the next rate hike will be the last one.

　　Fed Chairman Jerome Powell has previously said the central bank is prepared to raise interest rates higher than expected if inflation does not fall.

That fueled speculation that the Fed could raise interest rates by 0.5 percent next week.

　　However, the current market sentiment has changed a lot.

The successive failures of Silicon Valley Bank (SVB) and Signature Bank (Signature Bank) have made the view that "more restraint in monetary policy" is increasingly gaining momentum.

　　“Before SVB collapsed, the Fed was likely to raise rates by 0.5% at its March monetary policy meeting, albeit only slightly above consensus,” said Krishna Guha, head of global policy and central bank strategy at Wall Street investment bank Evercore ISI.

"But now, given the dramatic changes in the market recently, the Fed is definitely not doing that."

　　Guha also said that if the Fed can successfully restore stability to the banking sector, it is still possible that it will eventually continue to raise interest rates at a high level of 0.5%.