A Breakage in the Economy
April 3, 2023 - Last month the failure of Silicon Valley Bank rocked the financial markets and caused tremors throughout the entire banking system. Chief Global Strategist Rick Pitcairn says that the issues that surfaced have revealed a vulnerability in the Federal Reserve’s policy to bring inflation under control regardless of whatever it breaks in achieving this goal. “Well, something just broke,” says Pitcairn, “and it puts the Fed in an interesting position of trying to balance financial stability across the system against their traditional role of price and inflation control.”
Pitcairn says in this month’s Market in Five Charts that the broad banking sector is sounder than it was in 2008. However, more restrictive lending policies will hamper growth and as a result, the odds of a recession happening have increased.