FT News Briefing Banking crisis complicates interest rate decisions
Mar 22, 2023
A $15.6 billion loan from the IMF to Ukraine is on the horizon, stirring discussions about economic stability. Former central bankers are divided on whether to pause interest rate hikes amidst ongoing turmoil in the banking sector. Meanwhile, Janet Yellen reassures support for regional banks, even as First Republic Bank faces significant challenges. In international news, Xi Jinping backs Putin's stance on Ukraine but remains cautious about commitments on a gas pipeline, revealing the complexities of Sino-Russian relations.
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Interest Rate Debate
- Former central bankers debate pausing interest rate hikes amidst banking turmoil.
- Some argue that pausing would worsen inflation while others believe it's necessary to stabilize the banking sector.
Rationale for Raising Rates
- One camp believes central banks should continue raising rates to combat high inflation.
- They also fear that pausing could signal deeper banking sector issues, causing more harm than good.
Rationale for Pausing Rates
- Another camp views banking sector instability as a direct consequence of tighter monetary policy.
- They argue that central banks may have already done enough to curb demand and eventually lower inflation.