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Moody’s Analytics’ Mark Zandi says Fed unlikely to hike rates in March given banking turmoil


Moody’s Analytics chief economist Mark Zandi thinks the Federal Reserve is unlikely to raise interest rates at its March meeting as there is a “boatload of uncertainty” around the recent bank failures.

The financial turmoil of the past few days will certainly affect monetary policy decision making when the Federal Open Market Committee meets next week, he added.

“I think they’re focused on the bank failures that roiled the banking system and markets over the last couple of days,” Zandi told CNBC’s “Street Signs Asia” on Wednesday.

“There’s a boatload of uncertainty here,” as a result the Fed will want to be cautious, he added. “I think they’re going… [to] decide not to raise interest rates at the meeting next week.”

His comments follow U.S. regulators shutting down Silicon Valley Bank on Friday and taking control of its deposits in the largest U.S. banking failure since the 2008 financial crisis — and the second-largest ever.

On Sunday, policymakers scrambled to backstop depositors at both SVB and Signature Bank, which was also shuttered, to stem the panic around contagion risks.

Inflation ‘moderating’

The Fed’s calculation on interest rates could get complicated as the U.S. economy continues to fight high inflation. The latest consumer price index data on Tuesday showed inflation rose in February, but was in line with expectations.

Why the Federal Reserve aims for 2% inflation

Bank downgrade

Aggressive action

Policymakers’ “very aggressive intervention in the market,” helped a lot said Zandi, as well as signals that the government “is going to do whatever it takes to support the banking system.”

Despite the reassuring moves, the economist said the Fed should still pause its rate hikes to gauge just how much conditions have tightened, and what the impact is on the broader economy and ultimately inflation.

He expects the Fed to make two more quarter-percentage-point rate hikes — 25 basis points each time, at the May and June FOMC meetings.

For now, Zandi reiterated it’s better for the Fed to “just take a breath here, pause and see how the banking system responds to all this and how much of a restraint that’s going to be on the broader economy,” and could resume to raise rates again later in May should inflation remain a problem. 

 — CNBC’s Jeff Cox contributed to this report

Source: CNBC