It looks like the chances of a recession are growing. Goldman Sachs has raised its odds of a recession this year from 25% to 35% following Silicon Valley Bank’s collapse. Economists are anxiously awaiting the Fed’s next policy meeting this week, where the next interest rate decision will be made. There is pressure on the Fed to ease its rate hike campaign, yet that would also hinder its fight against inflation. Central bankers essentially have a choice: fight inflation or curb volatility. “I think a recession is extremely likely. I don’t really see a pass through the next 12 months without getting a recession,” said DataTrek co-founder Nicholas Colas. In other news, UBS announced it would buy Credit Suisse for almost $3.25 billion in order to stop further turmoil in the global banking system; Credit Suisse shares plummeted 60.5% as a result.
Business Insider/Jennifer Sor
Here’s why the Silicon Valley Bank crash has made a recession much more likely in 2023
Wall Street is worrying that the fall of Silicon Valley Bank has significantly raised the risk of recession in the US.
The chief concern is that the episode has complicated the Federal Reserve’s mission to keep fighting inflation, experts say, and the turmoil could be a distraction that spells trouble for the economy heading into the rest of this year.
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Opinion: ‘Someone needs to tell Jerome Powell that this is not a kill-at-all-costs mission.’ Cut interest rates now to prevent a full-blown banking crisis.
We’re nearing the tipping point where the U.S. economy and banking system either back away from the edge and return to safety or fall off the cliff and into a full-blown banking crisis.
The Federal Reserve could solve this in one step: Cut interest rates at its meeting this week.
Yet the odds of the Fed taking this step are slim. While most forecasts now have the U.S. central bank holding off on a rate increase, a pause simply isn’t good enough.
AP/Kelvin Chan and David McHugh
Deal for UBS to buy Credit Suisse sends shares tumbling
Shares of Credit Suisse plunged 60.5% on Monday after banking giant UBS said it would buy its troubled Swiss rival for almost $3.25 billion in a deal orchestrated by regulators to try to stave off further turmoil in the global banking system.
UBS shares also were down nearly 5% on the Swiss stock exchange.
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