Despite the recent impact of accelerated interest rate rises on the banking sector, the US Federal Reserve (Fed) and Bank of England still raised them by a further 0.25% this week.
This month, the banking sector felt the pressure of rising rates. We saw the collapse of Silicon Valley Bank in the US, and the waves of market contagion resulted in an emergency acquisition of Credit Suisse by UBS in Europe – even though it was not subject to the same issues as regional US banks.
These developments understandably caused concern, but the authorities acted very swiftly to stabilise the sector, which went some way to calming market jitters.
This increased the uncertainty around central banks’ decisions in scheduled interest rate announcements this week, according to Lilian Chovin, Head of Asset Allocation at Coutts.
Lilian said: “This is probably the first time in history where we went into a Fed meeting with expectations of three possible outcomes: a rate cut, no change, or a further rate hike.”