Fed's Tightening Plans Collide With SVB Fallout

The collapses of Silicon Valley Bank and Signature Bank give Federal Reserve policy makers two good reasons to hold off on raising rates when they meet next week. But the latest run of economic data can only serve to remind them why, until last week anyway, they planned to keep raising rates.

Investors’ expectations for the Fed have been whipsawing this year. Early on there were hopes that cooler inflation would lead the Fed to raise its range on overnight rates by a final quarter point at its March meeting, and then go on hold. A monster January employment report and unexpectedly strong inflation reports changed that. Last Wednesday, on the back of some hawkish-sounding testimony from Fed Chairman Jerome Powell, interest-rate futures put the chances of a half-point increase at the March meeting, rather than a quarter-point one, at nearly 80%.