Bank failures change the forecasts of the Fed, gold and currency movements
Following the failure of Silicon Valley Bank (SVB) and Signature Bank, expectations that the Fed will raise interest rates by 50 basis points at next week’s meeting have faded.
While it is taken for granted that the bank will raise interest rates by 25 basis points in pricing in money markets, Goldman Sachs, one of the major banks in the US, announced that they do not expect the Fed to raise interest rates at the meeting next week.
THE UNCERTAINTY INCREASED
Goldman Sachs analysts abandoned their expectation of a rate hike at the Fed meeting on March 22. “In light of recent stress on the banking system, we do not expect the Fed to raise rates at its March 22 meeting and there is significant uncertainty about the path after March,” Goldman economists said in a note.
While estimates that the bank will determine the final interest rate in the region of 5.00-5.25 percent came to light, said price signaled that the bank is expected to increase interest rates by 25 basis points maximum.
dollar down
Short-term bond prices registered the steepest rise since 1987, as market forecasts changed.
The dollar also lost value after considering that the Fed will have to end its aggressive measures sooner than expected. The dollar index fell to 103.8, the lowest level since February 16.
The euro/dollar parity also rose 0.8 percent compared to the close of the morning. The euro/dollar exchange rate traded at 1.072.
Dollar/TL, on the other hand, traded at the 19.97 level with a horizontal course.
GOLD IS ON THE RISE
Gold prices approached the $1,900 threshold as investors turned to safe havens amid concerns over the biggest bank failure seen since 2008. The precious metal topped $1,890 an ounce overnight.
The price of an ounce of gold in the spot market increased 0.3 percent daily to the level of 1873 dollars, and the gram of gold traded at the level of 114 TL.
THE FED’S TIGHT MONETARY POLICY WAS EFFECTIVE IN BANKRUPTCY
The SVB’s failure was the result of the Fed’s rate hikes. The bank had invested heavily in long-term bonds when interest rates were low, but the value of these bonds fell with rising interest rates. Therefore, as the Federal Reserve raised interest rates, the bank’s borrowing costs also increased.
Source: Sozcu
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
