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The Federal Reserve has increased its benchmark interest rate by a quarter of a percentage point and indicated that it may raise rates further in its battle against inflation, despite the fact that higher rates have led to a series of bank failures. In a statement, the Federal Open Market Committee stated that America’s banking system was strong and resilient. The committee voted to raise the federal funds rate to a target range of 4.75% to 5%, its highest level since 2007. This decision followed the European Central Bank’s decision to raise rates on March 16th.
America’s Treasury Secretary, Janet Yellen, has ruled out expanding bank-deposit insurance or providing blanket guarantees for savers following 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. However, on March 22nd, Mr Powell stated that depositors should assume they are safe.
UBS, Switzerland’s largest bank, has acquired its troubled rival, Credit Suisse, in an all-share emergency deal brokered by Swiss authorities for around SFr3bn ($3.2bn), a 60% discount on Credit Suisse’s stock market valuation. Holders of “Alternative-Tier 1” bonds issued by Credit Suisse were written off completely. FINMA, the Swiss financial regulator, defended its decision to write down the bonds.
2023-03-23 10:17:05
Link from www.economist.com