Markets Expect Fed to Raise Rates Despite Bank Turmoil
Banks in focus as the Fed weighs its rates move
If market predictions are correct, the Fed on Wednesday will raise borrowing costs by a quarter of a percentage point, even as growing turmoil in the stocks of regional banks threatens to choke off credit to businesses and consumers, pushing the economy into recession.
The decision comes amid a brutal sell-off in regional banks’ shares, which has wiped billions off smaller lenders’ market valuations. Investors have been worried about the health of these banks since March, when Silicon Valley Bank collapsed in one of the most prominent bank failures in U.S. history.
Regulators had hoped that the sale of the embattled First Republic Bank to JPMorgan Chase this week would contain the panic. But short sellers, investors who profit off bets that stock prices will fall, have continued to take aim at regional lenders like PacWest, Western Alliance and Zions Bancorp. (Shares in PacWest and Western Alliance are down again in premarket trading.)
Source: The New York Times
