The world this week--Business
The Federal Reserve raised its benchmark interest rate by another quarter of a percentage point and signalled that more rate increases could come in its fight against inflation, despite higher rates triggering a series of bank failures.
In a statement, the Federal Open Market Committee said America’s banking system was sound and resilient.
The committee voted to raise the federal funds rate to a target range of 4.75% to 5%, its highest since 2007.
The decision followed the European Central Bank’s decision to lift rates on March 16th.
America’s treasury secretary, Janet Yellen, ruled out an expansion of bank-deposit insurance or blanket guarantees for savers after four bank failures in 11 days.
Her comments came more than a week after the Treasury, the Fed and the Federal Deposit Insurance Corporation took swift action to protect depositors at Silicon Valley Bank, which specialised in banking services for tech startups, and Signature Bank, which is based in New York.
Yet on March 22nd Mr Powell said that depositors “should assume” they are safe.
UBS, Switzerland’s biggest bank, acquired Credit Suisse, its troubled rival, in an all-share emergency deal brokered by Swiss authorities for around SFr3bn ($3.2bn), a 60% discount on Credit Suisse’s stockmarket valuation.
Holders of “Alternative-Tier 1” bonds issued by Credit Suisse were written off altogether.
FINMA, the Swiss financial regulator, defended its decision to write down the bonds.
First Republic Bank, a lender based in California, has hired Lazard and JPMorgan Chase, two investment banks, as advisers amid discussions with potential investors and government officials to shore up its balance-sheet.
It follows attempts to rescue the lender by 11 Wall Street banks.
First Republic’s share price has fallen by 89% this month.
Inflation in Britain rose unexpectedly in February.
Annual consumer-price inflation rose to 10.4% in February, up from 10.1% in January. That was higher than the 9.9% forecast by analysts.
Inflation in Canada eased to 5.2% in February, down from 5.9% in January.
It follows the Bank of Canada’s decision to keep interest rates unchanged for the first time in nine meetings, making it the first central bank across the G10 group of large economies to pause its rate-tightening cycle.