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From inflation to financial stability… and back again?
With banking sector stress, markets consider fewer rate hikes will be necessary. Not because inflation is gone, but because tighter lending standards will do some or all of the job. If banking stress recedes, more rate hikes may be needed after all. From inflation risks to financial stability risks. The fallout from Silicon Valley Bank, Signature Bank, and Credit Suisse has opened the door to downside risks and spooked investors. More than anything, this has altered investors’ expectations of monetary policy from the Fed and ECB, with investors substituting expectations of further interest rate hikes with several ... (full story)