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Will the Federal Reserve continue to raise interest rates while the banking industry is on eggshells after the collapse of Silicon Valley Bank and Signature Bank earlier this month?

The anticipation is killing Fed watchers and investors alike.

Today we will finally get an answer.

Before the recent bank failures, some economists and policymakers were calling on the Fed to stop raising interest rates over fears it would trigger a recession. Even with signs of a slowing US economy and a slowdown in rising prices, Fed officials, including Chairman Jerome Powell, have indicated that the central bank will likely raise interest rates by 50 basis points at its March meeting to continue to rein in stubbornness. economic inflation.

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But after the recent banking failures, economists at Goldman Sachs said they did not expect the Fed to raise interest rates in March due to concerns that it would put undue pressure on banks.

However, if the Fed does not change interest rates, it could risk losing the battle against inflation, which rose sharply on a monthly basis in January and February. The annual inflation rate remains three times the Fed’s 2% target.

Tune in for live updates leading up to today’s crucial Fed decision:

What time is the Fed announcement today?

If the Fed raises rates, it will announce it at 2pm ET today.

When does Powell speak?

Powell will hold a press conference at 2:30 p.m. ET.

stock market today

Stocks were moving lower ahead of the Fed’s interest rate decision. The Dow Jones Industrial Average was down about 0.2% as of 12:21 PM ET.

Housing market and prices:The housing market is “hypersensitive” to higher Fed rates. Experts are considering the next step.

How retirees can deal with a bad market: Recover from crushing inflation, raising interest rates and bank failures

Shares of First Republic Bank (FRC)

First Republic Bank shares are volatile between gains and losses. As of 12:24 p.m. ET, shares of ET are down 5%. Late Tuesday night The Wall Street Journal reported The troubled regional bank has hired Lazard, a financial advisory group, to help it review strategic options that could include selling, according to people familiar with the matter.

This comes a week after the First Republic received $30 billion in capital from major US banks including Bank of America, Citi and JPMorgan.

Fed meeting forecasts

The consensus is that the Fed will raise interest rates by 25 basis points.

As of 10 a.m. ET on Wednesday, there was an 86% chance of that happening, according to the Chicago Mercantile Exchange. FedWatch toolwhich uses Fed Funds futures contracts to inform interest rate decision expectations.

Meanwhile, there was a 14% chance that the Fed will keep interest rates steady, which is a slight increase from yesterday.

Before the banking crisis unfolded, those possibilities looked very different. There was a 24% chance that the Fed would hike 50bp, a 76% chance of a 25bp hike, and a 0% chance of a stop.

Fed minutes

Several weeks after each Federal Reserve meeting, the central bank issues what are known as minutes. The minutes provide more detail about what led the Fed’s voting members to their decision on interest rates and a summary of what they discussed over the course of their two-day meeting. Sometimes, the minutes indicate what the Fed’s move will be at its next meeting.

You can read the minutes of the last meeting here.

Minutes from the March meeting will be released on April 12 at 2 p.m. ET.

The two-year Treasury yield

2-year Treasury yields were higher on Wednesday morning. As of 12:22 p.m. ET, they were hovering at a hairline of less than 4.2%. At the beginning of the banking crisis about two weeks ago, yields rose to 5%. The last time two-year returns were at this level was in 2007.

Short-term Treasury yields tend to rise when investors expect the Federal Reserve to raise interest rates.

Bitcoin price

Although the banking crisis has hit the stock market, bitcoin has performed particularly well. It was up more than 18% for the month as of Wednesday morning and was trading at more than $28,000.

Feed point plot

The Fed’s Summary Economic Outlook report, which is due for release at 2pm today, includes what is known as the Fed’s point chart.

A dot chart is a visual representation of where individual Federal Reserve officials expect interest rates to be in the coming years and over the long term. The point scheme was invented in late 2011 and was intended to add a new layer of transparency to the Fed’s monetary policy decisions.

In the most recent point chart, which was released in December, the majority of Fed officials at the time indicated that a federal funds rate of between 5% to 5.25% would be appropriate.

Why did the SVB collapse?

Silicon Valley Banks’ clients, which have largely been startups and other tech-focused companies, have begun to become more cash-strapped over the past year. This led them to withdraw money from their accounts.

Meanwhile, SVB needed to continue selling its assets, mainly US Treasuries, at a loss to free up capital so clients could withdraw funds. Normally, this is considered a safe long-term investment, but the interest rate hike by the Federal Reserve has caused the value of Treasury bonds to plummet.

SVB breakdown:What does the collapse of a Silicon Valley bank mean for the economy? Experts expect a modest decline.

SVB reached a point where losses were very high, and clients began to fear that SVB could not guarantee access to each client’s funds. This led to huge outflows from the banks which led to the intervention of the Federal Deposit Insurance Corporation.

Is my money safe in the bank?

If your bank is insured by the Federal Deposit Insurance Corporation, you don’t have to worry that the money in your bank will disappear in the unlikely event that your bank fails.

Although the FDIC has an insurance limit of $250,000, it and the Federal Reserve and Treasury Department have taken extraordinary measures to insure deposits from Silicon Valley Bank and Signature Bank that exceed the limit. Now there are talks about raising that limit either indefinitely or until the current banking crisis subsides.

You can learn more about how FDIC insurance works and additional steps you can take to ensure your money is safe in the bank by reading this story.

ECB rate decision

The banking crisis has not deterred the ECB It raised interest rates by 50 basis points at its meeting last week.

Even as Credit Suisse was struggling to raise capital to shore up liquidity, markets were generally unfazed by the ECB’s decision.

“The fact that markets have not reacted negatively” to the move “will also provide a measure of reassurance” to the Fed, economists at Barclays said.

History of the Fed rate hike

At the last meeting of the Federal Reserve, which took place between January 31 and February 1, interest rates rose by 0.25 percentage points.

Interest rates have risen seven times in the past year. Rates hovered near zero during the economic downturn of the pandemic and were then raised by 0.25 percentage point starting in March.

Another increase came in May, this time by 0.50 percentage points, followed by increases of 0.75 percentage points for four consecutive meetings. The Fed ended the year up 0.50 percentage point.

Banks are in danger of failing

In the wake of the Silicon Valley bank collapse earlier this month, A new study finds that another 186 banks are at risk of failure even if half of their depositors decide to withdraw their money.

This is because sharp increases in interest rates by the Federal Reserve to curb inflation have eroded the value of banking assets such as government bonds and mortgage-backed securities.

Fed report today

In addition to the Fed’s interest rate announcement at 2 p.m., the central bank is set to release its quarterly summary of economic outlook. The report provides an overview of how Fed officials think the economy will move in the next two years based on their projections for GDP, unemployment rate, inflation and where they think interest rates will be.

However, there is a possibility that the Fed will delay the release of the report today due to the uncertainty created by the recent bank failures. The last time the Fed delayed a SEP report was in March 2020 at the start of the pandemic.

Mortgage rates today

At the beginning of the month, the average Annual Percentage Rate (APR) of 30-year mortgage rate of 6.77%. This is more than double the rate of 3.22% seen at the start of 2022 and up from 6.55% in the previous week.

Mortgage rates and the Federal Reserve:The housing market is “hypersensitive” to higher Fed rates. Experts are considering the next step.

Details of current mortgage rates:How to shop for mortgage rates, more

What will Powell say after the interest rate announcement?

It’s no one’s guess what Powell will tell reporters at his press conference after the rate decision is announced.

Economists at Deutsche Bank, who expect the Fed to raise interest rates by a quarter of a percentage point, believe Powell will use his time at the microphone to “emphasize the growing uncertainty about the outlook in light of recent events.”

“It will also reinforce that the banking system remains healthy and that the Federal Reserve is ready to provide liquidity as needed,” economists at Deutsche Bank said in a note to clients earlier this week.

Economists at JPMorgan also believe that the Fed will raise interest rates by a quarter point. They expect that he will spend a significant amount of time during his press conference briefing reporters on the Fed’s plan to lower inflation, as well as addressing the current banking situation.

How many banks will fail in 2023?

Two FDIC-insured banks, Silicon Valley Bank and Signature Bank, have failed this year. The FDIC took over both banks and pledged to make all depositors full even if their account balances exceed the traditional insurance cap of $250,000.