Here’s what Wall Street thinks ahead of critical Fed meeting

Published

2 years ago

March 17, 2023

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close video Should the Federal Reserve capitulate?

OptionsPlay Director of Education and Product Jessica Inskip gives her take on how Fed Chair Powell should respond to high inflation on ‘Making Money.’

The Federal Reserve launched its war against inflation exactly one year ago to the day, kicking off the most aggressive interest rate hike campaign since the 1980s as it rushed to cool the economy.

In the time since March, 16, 2022, the U.S. central bank has lifted the federal funds rate eight times, underscoring just how serious policymakers are about tackling the inflation crisis. The increases put the key benchmark federal funds rate at a range of 4.75% to 5%, the highest since before the 2008 financial crisis.

The ninth increase is just around the corner, with Chairman Jerome Powell suggesting last week the Fed may need to raise rates higher than previously anticipated and pick up the pace of increases amid signs of broadening inflationary pressures within the economy.

INFLATION ROSE 0.4% IN FEBRUARY AS PRICES REMAIN STUBBORNLY HIGH

Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing, and Urban Affairs Committee hearing in the Hart Building March 7, 2023. (Tom Williams/CQ-Roll Call, Inc via Getty Images / Getty Images)

The hawkish commentary prompted investors to reevaluate their expectations for the meeting, with many ramping up the odds that the Fed approves a half percentage point hike during its March 21-22 meeting.

But Wall Street no longer sees that as a possibility after the stunning implosion of Silicon Valley Bank on Friday roiled global markets and triggered fears of a broader financial meltdown.

Silicon Valley Bank collapsed after a liquidity crunch, forcing a government takeover and raising questions over the fate of nearly $175 billion in customer deposits.

It marked the largest U.S. bank failure since the global financial crisis in 2008, and rising interest rates played a pivotal role in SVB's collapse, according to Treasury Secretary Janet Yellen.

"The problems with the tech sector aren’t at the heart of the problems at this bank," Yellen said Sunday in an interview with CBS’ "Face the Nation."

SVB COLLAPSE THROWS FED RATE-HIKE DECISION NEXT WEEK INTO UNCERTAINTY

That's because SVB, which largely catered to tech companies, venture capital firms and high net worth individuals, saw a huge boom in deposits during the pandemic, with its assets surging from $56 billion in June 2018 to $212 billion in March 2023. The bank responded by investing a large chunk of that cash into long-term U.S. Treasury bonds and other mortgage-backed securities.

That strategy backfired when the Fed started rapidly raising interest rates and the value of those securities tumbled.

A sign of a branch of the Silicon Valley Bank in Frankfurt, Germany, Monday, March 13, 2023. (AP Photo/Michael Probst / AP Newsroom)

That coincided with a decline in available funding for startups, which started drawing down more of their money to cover their expenses, forcing the lender to sell part of its bond holds at a steep $1.8 billion loss. When depositors realized that SVB was in a precarious financial situation, a bank run ensued.

The bank's collapse, coupled with another failure at Signature Bank and turmoil at Swiss lender Credit Suisse, drastically altered rate hike bets on Wall Street.

MORTGAGE RATES POST BIG DECLINE AMID SVB FALLOUT

While problems at the European lender appear to be unrelated to SVB, the back-to-back issues sparked fresh fears over the vulnerability of the banking sector in the era of high interest rates. Swiss regulators stepped in on Wednesday afternoon to announce they would provide liquidity to Credit Suisse if necessary.

Investors remain evenly divided over whether the Fed will pause its rate hike cycle next week or approve a 25 basis point increase, according to data from the CME Group's FedWatch tool, which tracks trading. But they are in wide agreement that policymakers will cut rates later this year amid the bank sector fiasco.

Pricing in futures markets suggests the central bank will trim rates throughout the year, shaving a full percentage point from a peak of 4.75% to 5% by the end of 2023.

The logo of Swiss bank Credit Suisse at its headquarters in Zurich, Switzerland, March 24, 2021. (Reuters/Arnd Wiegmann / Reuters Photos)

"The easing of recent inflationary pressures, combined with concerns about the banking industry, finally give the Fed reason to discuss a possible end to their tightening cycle at next week’s meeting," said John Lynch, chief investment officer for Comerica Wealth Management.

Still, new data released Tuesday morning revealed that inflation remains uncomfortably high. The Labor Department said the consumer price index, a broad measure of the price for everyday goods, including gasoline, groceries and rents, rose 0.4% in February from the previous month. Prices climbed 6% on an annual basis.

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Although it marked the slowest annual inflation rate since September 2021, the gauge remains about three times higher than the pre-pandemic average, underscoring the persistent financial burden placed on millions of U.S. households by high prices.

"The Federal Reserve is going to have to pick its poison: tolerate some inflation for a bit to see if its current series of rate hikes takes hold and pause or keep hiking and deal with the financial instability caused by their own policy decisions," said Jamie Cox, a managing partner for Harris Financial Group.

World

Mark Carney’s Liberal Party wins Canada election, according to Canadian broadcasters

Published

1 min ago

April 29, 2025

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Mark Carney's Liberal Party wins Canada election, according to Canadian broadcasters

Mark Carney’s Liberal Party has won the election in Canada, according to Canadian broadcasters, but it is too soon to say whether they will form a majority government.

Mr Carney, who took over as prime minister after Justin Trudeau stepped down earlier this year, has beaten the leader of the Conservative Party Pierre Poilievre, according to CBC and CTV News projections.

However, it is too soon to say whether the Liberals will form a majority government, they added. The party has not yet secured the 172 electoral districts it needs for a majority.

The election initially appeared to be a clear-cut race for the opposition Conservatives, who were enjoying a double-digit lead over the Liberals before Mr Trudeau resigned, and an intervention by Donald Trump led to a surge in support for Mr Carney’s party.

Mr Trump has repeatedly called for Canada to become the 51st US state since he was elected president for a second time and has imposed sweeping tariffs on Canada.

Mr Carney has vowed to take a tougher approach with Washington over its tariffs and has said Canada will need to spend billions to reduce its reliance on the US.

If Mr Carney’s party only captures a minority of the House’s 343 seats, he will be forced to negotiate with other parties in order to stay in power.

Such minority governments rarely last longer than two-and-a-half years in Canada.

Canadians went to the polls after 11 people were killed in a deadly attack at a Vancouver street fair over the weekend that led to the suspension of campaigning for several hours.

Police have ruled out terrorism and said the suspect is a local man with a history of mental health issues.

Mr Carney previously ran Canada’s central bank and later became the first non-Briton to become governor of the Bank of England.

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Sports

Lightning’s Hagel leaves G4 loss after high hit

Published

9 mins ago

April 29, 2025

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Lightning's Hagel leaves G4 loss after high hit

Greg Wyshynski

Apr 28, 2025, 09:30 PM ET

Tampa Bay Lightning forward Brandon Hagel left his team’s 4-2 loss to the host Florida Panthers in Game 4 of their Eastern Conference first-round series on Monday night after a high hit from defenseman Aaron Ekblad that wasn’t penalized.

With less than 9 minutes left in the second period, Hagel played the puck out of the Tampa Bay zone near the boards. Ekblad skated in on him and delivered a hit with his right forearm that made contact with Hagel’s head, shoving him down in the process.

The back of Hagel’s head hit the ice. He was pulled from the game for concussions concerns. Ekblad did not receive a penalty on the play.

The Lightning trailed the Panthers 1-0 at the time of the hit, but Mitchell Chaffee and Erik Cernak scored two goals in 11 seconds after Hagel left the game to give Tampa Bay a 2-1 lead. When the teams returned for the third period, Hagel was not on the bench.

The Panthers rallied in the third, as Ekblad, Seth Jones and Carter Verhaeghe scored to give Florida a 3-1 series lead. Game 5 is in Tampa on Wednesday.

Game 4 saw Hagel return to the Tampa Bay lineup after he served a one-game suspension for interference on Florida captain Aleksander Barkov in Game 2. The NHL ruled the Barkov wasn’t eligible to be hit and that Hagel made head contact with him. It was the first suspension of this career.

Hagel was one of the best two-way wingers in the league this season, with 35 goals and 55 assists in 82 games for the Lightning.

Sports

Nimmo matches Mets franchise record with 9 RBIs

Published

30 mins ago

April 29, 2025

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Nimmo matches Mets franchise record with 9 RBIs

ESPN News Services

Apr 28, 2025, 08:07 PM ET

WASHINGTON — Brandon Nimmo hit a grand slam and matched a franchise record with nine RBIs, helping the New York Mets past the Washington Nationals in a 19-5 rout on Monday.

Nimmo also hit a three-run drive in his seventh career multihomer game. The 32-year-old outfielder had four hits and scored four times after beginning the day with a .192 batting average.

All of Nimmo’s damage came in a three-inning span. According to ESPN Research, he became only the third player to pull off that feat in that time frame since the RBI became an official stat in 1920.

The win came a day after New York let a six-run lead slip in an 8-7 loss to the Nationals. The matinee bounce-back earned the club split of the four-game series. The Mets have won nine of 11 overall to improve to a major league-best 20-9.

“Really proud of the guys for flushing yesterday, coming back today and really going out there and work on all sides of the ball,” Nimmo said. “It was really fun to play today.”

Jeff McNeil and Mark Vientos also homered for New York, which finished with 21 hits. Vientos connected for a three-run drive against Washington infielder Amed Rosario in the ninth.

James Wood and Nathaniel Lowe homered for Washington in the eighth.

The Mets had a 3-0 lead when Colin Poche replaced Nationals starter Trevor Williams (1-3) with two on in the sixth. Nimmo greeted the left-hander by ripping a 2-0 fastball deep to right-center.

An inning later, the Mets had the bases loaded when Nimmo sent Cole Henry‘s fastball into the right-field seats for his second career grand slam.

Nimmo added a two-run double in the eighth to tie the franchise record for RBIs set by Carlos Delgado in the first game of a doubleheader against the New York Yankees on June 27, 2008.

“Tomorrow is a new day as well,” Nimmo said, quickly turning the page from the win. “And we’re just going to have to take it a day at a time, and treat it like it is its own.”

McNeil, who made his season debut Friday after sitting out 25 games because of a right oblique strain, hit the first pitch of the fifth deep to right for his first home run of the year.

“One hundred percent,” Mets manager Carlos Mendoza said, when asked if McNeil’s start has been good to see. “When you see him pulling the ball like that, and going deep? That’s a good sign. It’s good to see him continue with that approach.”

Griffin Canning (4-1) pitched five innings of four-hit ball for New York. He has won four consecutive starts for the first time in his six-season career.

Jose Urena earned his first save of the season. He gave up five runs in three innings in his Mets debut.

Williams yielded five runs in a season-high 5⅓ innings.

The Associated Press contributed to this report.