Experts Predict More Bank Runs, Will FED Hike Interest Rates?

In the lead-up to the acquisition of the First Republic Bank (FRC) by Wall Street giant JP Morgan, markets around the world are currently expecting the much-anticipated outcome of the Federal Open Market Committee (FOMC) meeting in the midst of the ongoing banking crisis. However, financial gurus and market experts predict that there could be additional bank runs in addition to what the United States has witnessed over the past sixty days — giving rise to the possibility of the Fed hiking interest rates amid the burgeoning banking shakeup.

Banking Crisis To Deepen?

Larry McDonald, a prominent market researcher and the founder of The Bear Traps Report, has voiced his concern regarding the FDIC’s desire to allow JPMorgan to take over more than 10% of deposits made by US citizens. McDonald brings up the special exemption the banking giant acquired from the FDIC, which further proves the existence of inherent desperation as the buyout bids over the weekend turned out to be incredibly weak. An unfruitful bidding could have made FRC wind up in government receivership.

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In addition, while discussing his perspectives on the upcoming FOMC meeting, McDonald expressed his suspicion that the Federal Reserve needs to “tone down” their rate hikes because anything on the hawkish side might result in an even greater degree of financial instability in the market. Recently, the banking regulator issued a cease-and-desist order to Cross River Bank, which is a partner of financial technology companies and crypto enterprises. The directive was issued due to the agency’s firm belief in “unsafe or unsound” practices in relation to fair-lending rules. The FDIC stated on Friday that the bank had failed to develop and maintain “internal controls, information systems, and prudent credit underwriting practices.”

The 57-year-old investment stalwart further hinted at the possibility that the Fed projects the hike as the last tight before a pause.

Market Gears For 25BPS

Meanwhile, the overall general consensus in the market is a rate hike of 25bps and the same is reflected on the CME FedWatch Tool which shows an overwhelming majority of respondents, about 89% of them, voting in favor of a 25 bps rate hike.

In related news, the Fed swaps indicate almost a two-in-three chance of a pause in June following a rate hike in May. Jerome Powell, Chairman of the Federal Reserve, will make the announcement regarding the decision to raise interest rates on Wednesday at 18:00 UTC.

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