- The US Central Bank has increased interest rates by 0.25%, less than it had said, but more than it thought. According to a report, 186 US banks are currently at risk of bankruptcy.
The disasters in Silicon Valley Bank and the precarious situation of the banks have not been sufficient to change the direction of the Fed, which has increased interest rates by 0.25% and already stands at around 4.75% and 5%.
A few weeks ago, CEO Jerome Powell announced that it would raise interest rates by at least 0.50%, arguing that inflation is still very high. However, due to the storm in the banking sector, many analysts believed that this decision was to be rejected and eventually maintained. The newspaper The Washington Post suggested it this Sunday in its editorial: “Bank bankruptcies are scary,” he said.
The fight for inflation has been pressured by the institution that justifies its existence, demonstrating that the situation in the financial sector may be worse than expected.
Be an inflation firefighter or bank savior -- nothing else. In this port it seems that Fed has taken a Salomon decision and has stayed halfway.
But the fight for inflation, which is the cause of its existence, has pushed the brakes, and this slowdown in the rate shows that the situation in the financial sector may be worse than expected.
186 banks close to bankruptcy
Since last week a report on US banks is flying. Published in the journal Social Science Research Network (pdf), the study warns that the value of bank assets – assets, guarantees and solvency – can be almost two trillion dollars less than what appears in the books, due to the rise in interest rates in the last year.
According to the report, 186 US banks are at risk of finding them in the same situation as Silicon Valley Bank; it would be enough for half of the customers to make money for the bank to sink. In total, risks of $300 billion could be incurred for the lack of insurance for these deposits.
And just take a basic notion to see that this can happen: “If all customers with deposits are equal, they will circulate in the same way and in the same direction and simultaneously.” Daniel Cohen has highlighted this risk, the French economist who raised the alarm with the 2007 real estate bubble, and here he has been picked up by Bloomberg.
Who will save them?
This situation seems to have caused the US central bank to present a looser face. “When Fe squeezes something,” says the saying, as The Washington Post recalled in the same editorial.
Faith President Jerome Powell recognized at the US Congress that the goal of raising interest rates is to increase unemployment
But those who are afraid to break the financial market don't care so much about breaking the lives of many families. This was demonstrated by Powell at the congress of the EE.UU. recognizing that the objective of raising interest rates is to increase unemployment, reduce consumption, cool the economy and reduce inflation.
Democracy Now! The response of Democratic Senator Elizabeth Warren is highlighted in these words. in addition to launching an investigation, he has asked the President of the United States, Joe Bide, to “dismiss” the head of the Faith, for “continuing to dismantle financial regulations and increase interest rates, which will presumably leave two million people unemployed.”
For many citizens, it can be 0.25% to pay or not to pay the mortgage, to bring a salary home or not, and a narrow character to secure or not turn on the heating.