Halyard’s Weekly Wrap – 4/14/23
Following the Federal Reserve-induced banking crisis that gripped the capital markets last month, much debate has focused on the next course of action. Clearly, the Fed’s sharp and relentless rise in interest rates, and negligence of its regulatory responsibility contributed to the demise of Silicon Valley Bank and Signature Bank. From that, an argument can be made that they should pause from any additional rate hikes to evaluate their action to date. If for no reason other than to let any banks that extended duration too soon generate some net interest income. However, an equally persuasive argument is that the inflation mentality is starting to become entrenched. From our perspective, there were three big hurdles to overcome to justify raising rates at the next meeting, and all of them have flashed a green light for the Fed. The employment report, the consumer price index, and the producer price index all portrayed an economy that is slowing, but by no means is falling off a cliff. That should be enough to give them room for at least another 25-basis point hike.