The bank failures and bailouts are a reminder that the risks are increasing as rising interest rates create more cracks in the financial system globally, writes Jennifer Hewett.
Welcome to the global state of anxiety where good news threatens to become bad news and bad news risks far worse.
Yet the low unemployment rate is another sign of the continuing inflationary pressures in the economy with business still finding it difficult to hire enough workers despite plunging consumer confidence. Even so, it’s not been enough to persuade investors the threat of a greater unravelling in the banking sector has been averted.Larry Fink from BlackRock
“We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the US regional banking sector … with more seizures and shutdowns coming,”Such reasoning explains a big jump in investors in the US futures rate market betting the Fed may actually pause next week after eight rate rises over the last year.
The nervousness infecting European bank stocks also means the European Central Bank also has been under pressure to dilute or delay this week’s expected increase of 0.5 per cent in its interest rates.Australia’s Reserve Bank remains in the firing line for community angst – particularly given the dominance of variable rates in Australia’s mortgage market compared to the 30-year fixed rates common in the US.
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