Central banks seem to be on a credibility drive at the moment. Last week it was the ECB, yesterday it was the Fed and today it was the Bank of England. All of them are on a mission to reiterate their approach of ‘because I said so!’ when it comes to raising rates. It seems that a snowballing banking crisis isn’t enough to spook them into thinking that maybe they have taken the wrong approach for a while now. Unsurprisingly, the more they bury their heads in the sand, the more savers and investors start to insure their portfolios with gold and silver bullion.
Do Central Banks really have everything under control?
Wednesday the Fed said…’don’t let the bank failures make you forget that we are invincible!
The message from the Fed this week literally was: yes, some banks collapsed after we raised rates but don’t worry …. we will create additional bailout mechanisms if more banks fail and meanwhile, we will continue raising rates too.
Despite problems in the banking sector, the Fed raised the fed funds rate by a further 25 basis points to a range of 4.75% to 5.00%. The Summary of Economic Projections released with the statement shows that, on average, members of the Committee think there will be one more rate hike to come this year, but are projecting the fed funds rate to decline to 4.3% by the end of next year, and down to 3.1% by the end of 2025.
The slightly higher fed funds rate projection contrasts with the change in statement language to The Committee anticipates that some additional policy firming may be appropriate… from the language used in the last meeting statement on February 1 that read The Committee anticipates that ongoing increases in the target range will be appropriate….
That .25% increase in interest rates comes just ten days after a coordinated effort by the U.S. Treasury, Federal Reserve, and FDIC (Federal Deposit Insurance Corporation). In a joint statement released on March 12 the three agencies went to great lengths to assure markets (and depositors in U.S. banks) by guaranteeing all deposits at the failed Silicon Valley Bank and at Signature Bank.
… We are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.
Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.
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