|
Mumbai, 14 March (Commoditiescontrol):According to Nomura, the Federal Reserve may cut rates and stop its quantitative tightening programme at its meeting next week, as the market selloff implies the central bank needs to do more to restore trust in the financial system.
"We now expect the Fed to decrease rates in response to emerging concerns to financial stability," Nomura said in a note, according to Bloomberg.
The Fed is also likely to "pause quantitative tightening," according to Nomura, citing the recent selloff in the S&P 500 as evidence that the Fed needs to do more to restore trust in the financial system.
Following the failures of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY), the United States government and Federal Reserve agreed to cover all depositors.
In addition, the Fed introduced a new funding programme that offers loans with durations of up to a year. Equities finished the day lower, owing to a more than 3% drop in financials led by banks such as First Republic.
Nomura's rate drop call is audacious, coming as 62% of traders expect the Fed to rise in March, with the majority of market participants pointing to persistent evidence of sticky inflation.
"We are sticking to our call for another 25bps raise next week," MUFG said in a note, citing the latest jobs report as evidence that inflation remained sticky.
"There is little evidence yet that higher rates have caused a substantial slowing in employment growth to satisfy the Fed that it has done enough," MUFG wrote in a note.
Some, meanwhile, are taking a middle path and supporting a hike moratorium. Barclays and Goldman Sachs both urged for a delay, with the latter citing financial system stress.
"In light of the banking system's fragility, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22," Goldman stated in a report published on Sunday.
For some, though, the instability in banking may be fleeting, and the Fed's primary attention will quickly revert to inflation.
|
0 Comments 
Post Comment 
