What will the Federal Reserve and Bank of England do with benchmark interest rates in the wake of the banking crisis? Traditionally, controlling inflation has been the prime mandate of central banks.
With annual inflation hitting double digits in the past year, many central banks have been hiking interest rates to try and bring it under control. The European Central Bank (ECB) raised its main rate from 2.5% to 3% on March 17, and all eyes are on the Fed and Bank of England (BoE) to see if they do likewise. The Fed is due to announce its decision on March 22, while the BoE takes its turn on March 23.
The trouble is that the calculus has changed over the past couple of weeks, as several banks have been pulled under by the strains caused by high rates. Most recently, Credit Suisse has been hastily taken over by fellow Swiss bank UBS, while bank stocks are still tumbling around the world as investors fear there will be other casualties. So what do the central banks do next?
