First Republic is the fourth bank in a week to show signs of financial distress. What does this mean for Australian interest rates – and mortgages?
In SVB's case, soured investments produced a reduced capacity to meet depositors' demands.
Anticipating a crisis, Wall Street titans – including JP Morgan Chase and Citigroup – offered a cumulative $30 billion in cash to safeguard the bank. In addition, AMP's chief economist Shane Oliver noted today there have been "record bank borrowings at the Federal Reserve's discount window". The financial news flow has major Australian banks reassessing their forecast for interest rate movements both in Australia and overseas.The thinking is that notwithstanding a credit crunch, financial intermediaries are likely to reduce their lending in the months ahead, and that will crimp economic growth further.
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