Goldman Sachs says it doesn't expect a Fed interest rate hike in March after Silicon Valley Bank's implosion
The implosion of Silicon Valley Bank, or SVB, and the resulting panic in the banking sector is expected to thwart the Federal Reserve's hawkish efforts on interest rates, according to one major bank.
Goldman Sachs now doesn't expect the Federal Open Market Committee to hike interest rates at its next two-day meeting on March 21 and 22. The investment banking giant was previously expecting the US central bank to hike the rate by 25 basis points, or 0.25 percentage points at this meeting. "In light of recent stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March," Goldman Sachs analysts wrote in a Sunday note seen by Insider.
Goldman Sachs is still expecting the Fed to deliver 0.25 percentage points rate hikes in May, June, and July with a terminal rate — when officials are expected to end this rate hike cycle — of 5.25% to 5.5%. But it sees"considerable uncertainly about the path."signaled the central bank is likely to hike rates higher than previously expected.
To meet liquidity needs, SVB's tech clients started withdrawing funds from the bank — so the financial institution started raising funds, selling a $21 billion portfolio last Wednesday.
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