Action Investments Limited - Could the Fed stop raising rates due to the financial crisis?

At their upcoming meeting, policymakers at the Federal Reserve are confronted with a challenging dilemma:
SHEUNG WAN, Hong Kong - May 10, 2023 - PRLog -- Should they increase their benchmark interest rate further to curb inflation, or maintain the status quo to prevent putting undue pressure on the financial system?

Economist Robert Fry stated in a commentary that while inflation data indicates the need to continue raising interest rates, the distress in the financial market suggests the opposite, creating a conflicting situation.

It is widely anticipated by traders that the Federal Reserve will concentrate on inflation and declare a 25 basis-point increase to its benchmark fed funds rate during the upcoming Wednesday meeting. If it occurs, it will mark the eighth consecutive rate hike in the same number of meetings.

CME's FedWatch tool, which predicts Fed rate increases based on bond trading activity, indicates that there is a probability of roughly 25% that the Fed will not raise the rate at all.

To prevent further strain on the banking system, the Fed may choose to halt its rate hikes. After the collapse of Silicon Valley Bank, the government acted swiftly to rescue the depositors and assure the public that their funds were secure in the country's banks.

While there have been no additional bank runs or failures, there are still repercussions from the previous incident. Economists suggest that the Credit Suisse's distressed sale to UBS is a clear indication of the degree of pressure that the Fed's rate hikes have already exerted on the financial system.

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