Goldman Sachs, a major investment bank, no longer thinks the Federal Reserve will hike interest rates this month, citing instability amid the collapse of Silicon Valley Bank.
Analysts say the Federal Open Market Committee will want to minimize the “recent stress” in the financial industry after the White House took extraordinary measures to shore up SVB users and regulators shut down Signature Bank to stem wider fallout.
“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman economist Jan Hatzius said in a Sunday note reported by CNBC.
Previously, Goldman expected the Fed to raise rates by a quarter of a percentage point as the central bank scrambles to cool the economy and rein in inflation.
President Biden on Monday is outlining the steps he is taking to make depositors whole while minimizing risks to taxpayers or the wider financial system.
Goldman analysts said federal efforts should bolster depositors’ confidence but not amount to the sweeping actions that were executed following the economic collapse in 2008.