25 bps and ( yet ) another one bites the dust
May 04, 2023
As expected, the Fed rose its funds rate by another 25 basis points to 5-5.25% yesterday. Noticeably it withdrew in its statement from its previous predictions that further rate hikes would follow. It now increasingly looks like the smaller US banks are the first collateral damage of the higher interest rates. Pacific Western announced yesterday “reviewing its strategic options”, read the bank is in big trouble. Even excluding this new casualty, the carnage in regional banks is now already bigger than the one seen during the great financial crisis. We are worried as bank runs are first and outmost about the loss of confidence of the depositors.