Fed Chairman Jerome Powell has been caught off guard by bank failures in the United States. (©AFP)
The banking crisis should lead to a tightening of credit conditions. The cycle of rising interest rates is coming to an end.
Who would have thought that, in the fight against inflation, the banking system would do some of the work itself instead of the Fed?
In the space of three weeks, the US economy seems to have changed course, moving from the preferred scenario of a soft landing to a hard landing. This would plead for the process of monetary tightening, initiated a year ago, to be shortened. The cause of this change? The banking crisis that erupted on March 8 and its likely consequences for the economy as a whole.
Until then, the Federal Reserve had been counting on a gradual and moderate slowdown in growth, which would result from its successive rate hikes. But more and more professionals were skeptical, like M&M Investments, which says it is convinced that the United States needs a recession to bring inflation back to the 2% target, given the the rigidity of some of its components and the persistent vigor of the labor market.
Vigor in the 1st trimester
The statistics published in February and March seemed to prove them right, since they showed stronger-than-expected growth. The US labor market appears very solid, with nearly 830,000 jobs created during these two months.
The preliminary surveys of purchasing managers for March
