The Fed’s job has gotten much tougher of late as the fight against inflation now meets fears it will exacerbate the fallout from recent bank shutdowns. This was arguably reflected in the central bank’s change of tone this week as it hiked interest rates by a quarter of a point. The Fed said it was committed to price stability but acknowledged it could not be sure about the economic outlook or credit flow. Chairman Jay Powell may now have the unenviable task of choosing a role model from among his predecessors: is he Paul Volcker, the anti-inflationary? Or Ben Bernanke, the crisis firefighter? The bond market seems to be saying that the long-predicted recession will in any case finally materialize this year – as will the rate cuts. The Bank of England also pushed ahead with another rate hike this week, forecasting that the UK economy will avoid a slowdown and that inflation remains a risk. As central banks may near the peak of their tightening cycle, “be careful what you wish for,” writes Jonathan Levin for Bloomberg Opinion. “The next round of problems is just beginning to bubble up.”
How safe is your money? This question occupies many people after the recent upheavals. Three mid-sized US banks have fallen and a fourth is still teetering. And even though Credit Suisse was acquired by UBS, that didn’t seem to help financials. Treasury Secretary Janet Yellen told US lawmakers regulators were prepared for more steps to protect US deposits, and the European Central Bank said its banking sector was strong. Nevertheless, investors remain nervous for the time being. For businesses and consumers, higher interest rates and an economic slowdown could mean reduced access to credit, changes in interest rates on deposits, or losses on investments. If you’re concerned about the safety of your savings, here are some pointers.
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