After the failure of the Silicon Valley Bank (SVB), the analysts at Goldman Sachs have changed their outlook for the upcoming rate hike in March.
According to Goldman Sachs, the US Federal Reserve will no longer be in a position to introduce a new rate hike after the failure of a major US bank. In fact, another big bank known as 'Signature Bank' has also gone down in the last few days.
In such a harsh environment for the US banking sector, a new rate hike will put more stress on the US economy. In fact, economic uncertainty has also turned higher after the recent events.
Earlier, Goldman Sachs was forecasting a 25 bps rate hike in the upcoming March meeting.
Even the US regulators know that the current situation is not good for the banking sector and the US economy as a whole. That's why they have assured the customers of Silicon Valley Bank about their fund's access and security.
The analysts believe that the regulators had to provide some serious liquidity to handle the deposit outflows in the affected banks. The move also prevented the depositor's confidence from falling even further after the crash.
For the upcoming meetings in May, June, and July, the analysts at Goldman Sachs still believe in 25 bps rate hikes. This is an indication that experts only believe the recent failure of banks is a short-term setback to the US economy.
After the renewed forecast, the terminal rate in the US will be somewhere between 5.25% to 5.5%. But if the current situation further deteriorates and some more banks fall, the next Fed meetings In May, June, and July will also lead to no rate hikes.
Similarly, the banking crisis in the USA could open doors to further trouble in the global banking sector as well. After all, the modern banking sector is interconnected that it can be difficult to remove every risk.