Rumors that the failure of Silicon Valley Bank (SVB) would be enough to spook the Federal Reserve out of its relentless campaign to raise interest rates started cropping up before Signature Bank’s implosion came to light only days later. But as the May 3rd Fed meeting inches closer, it’s becoming clearer and clearer that those speculations may be nothing more than wishful thinking.
In the weeks leading up to SVB’s demise, expectations that the benchmark interest rate of the US central bank would increase to as much as 5.7 percent by the summer of 2023 were reflected in futures markets. Then, a monetary domino-effect happened: a bank run tipped SVB into the red on March 10, which prompted many of Signature Bank’s customers to panic and withdraw such large amounts of money that federal regulators had to intervene and shut it down on March 12. The, because tragedy comes in threes, Credit Suisse (a major global bank with operations in many countries, including the United States) collapsed later that month before Swiss authorities hastily brokered a takeover of the bank by larger rival UBS. With two of the largest bank failures in U.S. history and the shotgun merger of a major bank abroad, market analysts believed that the Fed would no longer need to take such drastic measures in order to fulfill its policy objectives.
The series of extraordinary liquidity crises made last month one of the most notable time periods since the financial crisis in 2008, but leading up to the
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