JUST IN: Inflation cooled to 6% in February as the Federal Reserve considers further interest rate increases to slow the economy.
Given the tumult in the banking sector, analysts increasingly expect the Federal Reserve toGovernment regulators, including the Fed, have raced to quell fears of a broader contagion after policy makers' campaign to increase borrowing costs — part of a months-long crusade against inflation — contributed to the crisis that took down SVB.to the inflation data in pre-market trading Tuesday, with Dow futures jumping by 200 points and bank stocks regaining some ground from a punishing Monday.
"While we agree that more tightening will likely be needed to address the inflation problem if financial stability concerns abate, we think Fed officials are likely to prioritize financial stability for now,” Hatzius wrote. Other economists suggested the news of SVB's failure had, so far, done little to alter the trajectory of price increases in the economy and thus the pressure on the Fed to continue to raise rates.
Morgan Stanley said in its most recent note to clients that it could not rule out another 0.5% hike. Evercore's ISI research unit and JPMorgan both believe a 0.25% hike is more likely. In addition to Goldman Sachs, Barclays financial group also believes the Fed will pause its rate hiking regime entirely. And Nomura Securities believes the Fed could even cut interest rates at its next meeting.
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