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The Federal Reserve is seen raising its benchmark rate a quarter of a percentage point next week and again in May, as a government report showed U.S. inflation remained high in February, and concerns of a long-lasting banking crisis eased.

Prices of fed funds futures after the report reflected solid bets on an increase in the benchmark rate to a 4.75%-5% range at the Fed’s March 21-22 meeting, with about a 15% chance seen of no change. By May the benchmark rate is seen rising further to a range of 5.00%-5.25%.

Until late last week financial markets had been pricing in a bigger half-point rate hike to stem persistently high inflation.

Expectations shifted abruptly after a bank run triggered the failure of two banks and a dramatic move over the weekend by the Fed and other U.S. regulators to ensure the safety of deposits and shore up confidence in the banking system.

With fears of financial system instability roiling markets, futures traders at one point were pricing in no interest-rate hike in March and about 75 basis points of interest rate cuts by the end of 2023.

Bank stocks on Tuesday erased some of their recent large losses. Meanwhile the Labor Department’s inflation report showed a 6% rise in the consumer price index last month from a year earlier. It was the smallest gain in a year and a half, but far too high for the central bank to declare its work is done.

The Fed’s inflation target is 2%.

“Inflation has peaked but remains stubbornly firm and isn’t declining as quickly as the Fed would like,” analysts at Jefferies wrote. “The recent string of regional bank failures likely closed the door on a 50 (basis point) rate hike, but today’s data suggests that the Fed is going to remain on-track for a 25 (basis point) hike on March 22.”

Fed policymakers will publish their own rate path expectations next week. In December they had pointed to a top Fed policy rate this year of 5.1%, and with continued labor market strength and stubbornly high inflation they have been expected to signal a higher stopping point.

Traders for their part continue to price in some easing by summertime and see the Fed policy rate ending 2023 at just under its current level.

It is unclear how big a blow Friday’s failure of Silicon Valley Bank will deal to business and consumer confidence, said Andrew Hunter, deputy chief US economist at Capital Economics.

But even if the situation is resolved relatively quickly, there will be “a lasting tightening in credit conditions as banks shore up their balance sheets which will eventually hit economic activity,” he said. “In that context, although the CPI data increase the chances of the Fed continuing to hike next week, albeit by no more than 25bp, we doubt officials will be rushing to signal significant further tightening beyond that.”

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