US inflation dropped to 6% over the 12 months to February, complicating the picture for interest rates as banks and stock markets feel the hit from the Silicon Valley Bank collapse
Sky's economics and data editor Ed Conway explains what happened with Silicon Valley Bank and what it means for the financial sector.
SVB had a large amount of government bonds - state IOUs - on its balance sheet which collapsed in value over the past year as interest rates rose. At the same time, the bank had to pay higher rates on deposits. Goldman Sachs, the global financial services company, said it now expects there to be no rate rise at all at the end of the month.A number of other commentators agreed, or said the most they expected was a 25 basis point rise.
Dakota Wealth Fairfield's Robert Pavlik said:"I think they're going to probably be on hold because they're worried about the issue of contagion and the precarious position that it puts the banks in with regards to their balance sheets. "If the Fed's worried about saving face or coming off as wishy washy or worried about losing credibility with the market, they're going to raise by 25 basis points. I think that's what they should do, but they probably won't."
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