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Factbox-SVB collapse may prompt Fed to go slow on rate hikes

Published 03/13/2023, 07:23 AM
Updated 03/14/2023, 01:50 AM
© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., on March 19, 2019. REUTERS/Leah Millis/File Photo

© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., on March 19, 2019. REUTERS/Leah Millis/File Photo

(Reuters) -Traders no longer expect a rate hike of 50 basis points by the U.S. Federal Reserve next week as the surprise collapse of lender Silicon Valley Bank rattles the financial system.

The current projection is for a 25 bps move, with some expecting no hike at all or even a cut.

That is a quick reversal in expectations after hawkish commentary from Fed Chair Jerome Powell had prompted traders to see a 70% chance of a 50 bps rate hike just a week earlier.

Following are rate expectations from major Wall Street banks:

Bank Current expectation Expectation before SVB

crisis

March hike Terminal March Terminal rate

(in bps) rate hike

(in

bps)

Goldman No hike 5.25% - 5.5% 25 5.5% - 5.75%

JPM 25 5% - 5.25% 25 5% - 5.25%

Citi 50 5.5% - 5.75% 50 5.5% - 5.75%

BofA 25 5.25% - 5.5% 25 5.25% - 5.5%

Morgan 25 5.12% 25 5.125%

Stanley

Barclays (LON:BARC) No hike 5.1% 50 5.25% - 5.5%

© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., on March 19, 2019. REUTERS/Leah Millis/File Photo

NatWest No hike N/A 50 N/A

Nomura 25 bp cut N/A 50 N/A

Latest comments

Higher rates caused the problem because SVB was not well managed. And SVB is not the only one.
Wishful thinking
Higher rates didn't cause the problem at SVB, bungling by management did.
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