A “widespread credit crunch” caused by recent stress in the banking sector may bring the U.S. closer to a recession, says Minneapolis Fed President Neel Kashkari. “That credit crunch…would then slow down the economy. This is something we are monitoring very, very closely,” Kashkari said, adding that it is too soon to make any forecasts of the next interest rate decision. Brian Gardner, Stifel’s chief Washington policy strategist, sees Congress having to lift the debt ceiling sooner than anticipated as compensation. “We’re probably going to see a slowing down of the economy, a little contraction of credit. So receipts to the government—those cash flows—are probably going to slow,” said Gardner. According to the chief investment strategist for RIA Advisors, it is certain that the banking crisis will end in a recession as lending contracts—and when the Fed historically begins to cut rates, it will be the first recognition of such.  

Reuters via Yahoo Finance/Howard Schneider
Fed’s Kashkari: Banking stress brings U.S. closer to recession – CBS

Recent stress in the banking sector and the possibility of a follow-on credit crunch brings the U.S. closer to recession, Minneapolis Fed president Neel Kashkari said Sunday in comments to CBS show Face the Nation.

“It definitely brings us closer,” Kashkari said. “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. That credit crunch … would then slow down the economy. This is something we are monitoring very, very closely.”

Continue reading, here.

Business Insider/Filip De Mott
A US debt crisis will arrive sooner as banking turmoil hits the economy and federal revenue, strategist says

The banking turmoil could accelerate urgency on the debt ceiling, according to Brian Gardner, Stifel’s chief Washington policy strategist.

This is because as banks become more cautious with lending in the wake of Silicon Valley Bank’s collapse, the economy as a whole will cool and limit the amount of revenue the government receives, he told Yahoo Finance Live.

You can read the full article, here.

Epoch Times/Lance Roberts
A recession is guaranteed this year based on Jerome Powell’s favorite bond-market gauge

As the Fed tightens monetary policy, a banking crisis is historically the first evidence that something is breaking. As noted recently in “Not QE,”

Last week, amid a rash of bank insolvencies, government agencies took action to stem a potential banking crisis. The FDIC, the Treasury, and the Fed issued a Bank Term Lending Program with a $25 billion loan backstop to protect uninsured depositors from the Silicon Valley Bank failure. An orchestrated $30 billion uninsured deposit by eleven major banks into First Republic Bank followed. I suggest those deposits would not occur without Federal Reserve and Treasury assurances.

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