Pierre Gruson
KEDGE Business School
Senior Professor in Market Finance
After the shock caused by the Silicon Valley Bank bankruptcy, there are great fears of aftershocks in the United States but also in the rest of the world. What can the FED do to prevent the risks? Are European banks safe? We asked Pierre Gruson for his opinion.
Should we expect an intervention from the FED?
Prior to the Silicon Valley Bank liquidity crisis, the Fed Open Market Committee (FOMC) announced a 0.50% increase in the Fed Fund for its March 22 meeting.
Since then, the consensus of analysts published by Bloomberg anticipates an increase reduced by half to 0.25%.
Not to increase is to recognize the seriousness of the crisis. To stay the same, as if nothing had happened, is to maintain the stress on the markets and increase the vulnerability of certain institutions.
In recent months, the Fed has undertaken a significant reduction in the size of its balance sheet. Less refinancing was granted to financial institutions. This was a logical accompaniment to successive increases in primary rates.
All of these efforts have been undone by the recent crisis.
