According to CNBC, with "turmoil in the financial sector and uncertainty ahead, the Federal Reserve will likely approve a 0.25 percentage point increase at this week’s policy meeting." This is probably incorrect.
As the New York Times noted, it has been "one year since the central bank began the current rate-raising cycle. Many economists expect central bankers to raise interest rates a quarter-point, to just above 4.75 percent, on Wednesday, continuing their fight against rapid price increases." We are not one of those economists.
With uneven markets signaling a real risk of further bank runs, the safe strategy is to pause rate increases. This is supported by the fact that an important measure of inflation, #CPI , rose 0.4% in February and 6% from a year ago. This is down from 9% in June, 2022. A decline of this magnitude and an increase in tech layoffs both point to the fact that Fed policy is working, with no need for immediate additional pressure on banking institutions to slow lending. Such a move only risks hurting small businesses and retail borrowers.
At this point, the Fed will declare victory on rates and focus on sanctioning those who accelerated the run on SVB, specifically Peter Theil and his Founders Fund. The Fed should also claw back the proceeds of management stock sales and bonus payments made prior to a bank's failure.
The Fed knows that just stating it is considering these actions will do more to shore up depositor confidence than a rate hike....and they can always raise rates next week or next month.