Stress in US Regional Banks Continues, While the Fed Moves Towards a Pause

Thursday 04 May 2023

Investment Talks

Stress in US Regional Banks Continues, While the Fed Moves Towards a Pause

May 2023 | US Federal Reserve Chair Jerome Powell addressed concerns about the banking system, stating that conditions have broadly improved since early March, and re-emphasizing that Fed focus will now be on credit tightening. He said the Fed needs a few months of data to determine if monetary policy is sufficiently restrictive and continued to reiterate the importance of lifting the debt ceiling. While the financial markets may become excited about the prospect of the Fed moving to or near a pause, we would advise caution regarding any near-term course reversal by the Fed since the incoming inflation and economic data are not likely to support rate cuts.

01 | The recent banking stress has been a real test of capital and liquidity regulations enacted after the 2008 crisis.

02 | Market attention will also turn to the prospects of a government default. As a result, we expect to see more volatility in financial markets in the coming month.

03 | The FOMC raised the federal fund rate by 25bp but dropped future guidance. We think that the Fed is setting the table for a conditional pause in monetary policy.

Stress in US Regional Banks - Fed Moves Towards a Pause

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of May 04, 2023. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.

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