On Fed Day, central bank officials are anticipated to announce a 0.25 percentage point rate increase at 2 p.m. ET, in response to ongoing inflation concerns and the current banking crisis. The decision comes after Dow futures edged higher early Wednesday following renewed jitters about regional banks that sent major indexes down more than 1%. If implemented, this move would raise the benchmark federal-funds rate to a 16-year high.
The Federal Reserve's aggressive campaign against inflation is expected to continue with this latest rate hike, while consideration for a pause could come as early as May due to the ongoing banking crisis. Treasury Department officials have warned of potential default on U.S debt by June 1 if there is no increase in the limit on federal deficit spending.
JPMorgan's recent acquisition of assets from a failed bank has ignited political debates over Wall Street's most powerful banks' influence during these turbulent times. The Fed does not anticipate cutting rates until next year, but much depends on how high policymakers choose to raise them and when they decide it is time for a pause.
Economists remain divided on whether further rate increases should be implemented or halted altogether. Some argue that previous hikes have sufficiently calmed economic conditions, while others believe additional increases risk causing an inevitable recession affecting low- and middle-income earners.
Senator Elizabeth Warren (D-Mass.) and Representative Pramila Jayapal have called upon Federal Reserve Chair Jerome Powell to stop all future rate hikes entirely. They warn that too many increases may cost numerous jobs among growing segments of the population.
As regional banks' shares fall amid market turmoil wiping off billions from smaller lenders’ valuations, ten progressive lawmakers urge the central bank to halt its planned rate hikes so as not "to engineer a recession that destroys jobs and crushes small businesses." Investors are keeping an eye on struggling regional lenders like PacWest, Western Alliance, and Zions Bancorp.
While the White House is considering a potential constitutional challenge to allow it to raise the debt limit without congressional approval, Starbucks shares have dropped 5% in premarket trading as second-half guidance for 2023 remains unchanged. Corporate raider and shareholder activist Carl Icahn continues making waves by pressuring corporate titans into bowing down.