Walid Salah El Din
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After looming financial risks we have seen this month since svb’s crisis, the odds of watching 50 basis points hiking today diminished and the probability of holding rates unchanged increased but the most expected is still tightening by 0.25% for curbing inflation.
Until now, The Fed is looking aware of the problem and eager to work on it with the treasury and other counterparts opening swaps window with other 5 major central banks to infuse USD liquidity.
But what can they do next by God's will;
- The FOMC can lower the interest rate to lower the pressure on the banking sector generally and to reduce the probability of watching further fallout. But that is hard to bring back the trust in the financial market and the banking sector as no sign of inflation setting back or even looming recession risks yet. While the Fed fund rate is now close to 5%, after tsunami of hiking by the Fed hit the banking sector which lived for relatively long period of holding rates it near zero.
- The Fed can show also trust in the banking the sector and economic performance and choose to tighten by another 0.25% to fight inflation and this is also respectful choice as it shows also that it is well-contained problem.
- The Fed can choose to provide relatively low yielding loans for the banking sector grunted by the banks holding of US Treasuries as a Collateral on their maturities to smooth the pressure on them. This action can support them directly to face the crisis and that is my view and it can be taken with other easing steps, if the pressure on the Fed accumulates and it can be also with the Fed’s current adopted policy to fight inflation.
Surely, the new quarterly announced projections of the interest rate by FOMC’s members will be closely watched to know their will and also their evaluation of the inflation, the growth and the unemployment rate next.
Not Walid Salah El Din nor FX recommends accepts any liability for any loss or damage what's ever that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in these trading recommendations.
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