Powell’s Ninth

After nine policy rate hikes in a row, the Fed is not quite sure what to do next. The collapse of SVB triggered a surge in stress in the banking sector. This failure was due to poor management of interest rate risk in a context of monetary tightening, not to a deterioration of asset quality following a weakening of the economy. Other accidents of the same type cannot be ruled out. In this case, there would be a negative shock on credit, activity and prices, a combination that wou...