The Federal Reserve has increased rates at a historically high pace to control inflation but the side-effects of that policy have contributed to banking failures. It’s also likely that higher interest rates will be felt by the housing market, perhaps cause a recession and the even impact the Federal budget if sustained over the coming months and years.
Rising Rates
The Federal Funds rate has risen from effectively zero at the start of 2022, to over 4.5% today. That’s an abrupt change in interest rates over a period of little more than a year. It’s pressured banks as the assets they typically hold such as government debt and other fixed income assets have fallen sharply in value as rates rose. That’s contributed to the collapse of Silicon Valley Bank and Signature Bank and also created pressures at First Republic Bank
FRC
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