June 5, 2023

Taylor Daily Press

Complete News World

One more rate hike in the US, and then a pause

Federal Reserve Chairman Jerome Powell

NOS news•

Interest rates in the United States will be raised by another 0.25 percentage points, followed by a pause in increases. This was announced by the Fed, the US central bank, after a series of rate hikes.

According to the central bank, the break aims, among other things, to create space for analyzing the effects of the recent banking crisis. The bank wants to wait for the outcome of the political impasse over the US debt ceiling and see how inflation develops.

The central bank, like the European Central Bank, has been raising interest rates rapidly to fight inflation. Inflation in the US in March was 5 percent from a year earlier. It was still 6 percent in February.

Slow down the economy

With interest rate hikes, the central bank wants to slow the economy, reducing demand for goods and with it prices and inflation. The US economy is already in recession. Additionally, interest rates in the US are already at 5.25 percent, a tenfold increase in more than a year.

Interest rates in Europe are currently 3 percent. The European Central Bank will announce new rate hikes tomorrow. Due to low interest rates and high inflation compared to the US, a break in Europe is not yet in sight.

Troubled banks

In the US, banks are somewhat reluctant to extend credit, as three US banks have recently run into trouble.

First went under Silicon Valley Bank; That bank’s financial buffers were eroded by rising interest rates, after which customers withdrew more than $40 billion in a few days. Then there was the failure of Signature Banks and last week, Republic Bank.

The latter ran into problems due to its large portfolio of mortgages with low interest rates. Initially the bank could be sustained with financial assistance from competitors and emergency loans, but devaluation of buffers did not play a role alone.

Rich tech people

Like other troubled banks, First Republic Bank managed large deposits that were not protected by the US Deposit Guarantee Program, which insured assets up to $250,000.

Silicon Valley Bank and First Republic Bank have been home to several San Francisco tech leaders, including Facebook founder Mark Zuckerberg, The Washington Post reported.

Many decided to withdraw some or all of their money as a precaution. The speed of online banking allowed us to do this in a matter of hours. In a short span of time, over $100 billion was taken in a one-of-a-kind digital banking movement. This caused panic among investors, who sold their stocks in droves.

Just hours before the stock market opened last Monday, it was announced that JPMorgan Chase had acquired all of the bank’s assets and investments.

Below explains how bank 3 will fall in NOS:

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