Will there be more SVBs in the US? The answer is a resounding yes. What about India? The chances are remote, despite chinks in the armour in the form of unregulated entities like collective investment schemes.
The US Federal Reserve (Fed) cut rates by 150 bps in early 2020 and pumped trillions of dollars to support the economy during the Covid crisis. The after-effect of the ultraloose fiscal/monetary policy was reflected in elevated inflation from early 2021. The Fed termed the rise of inflation as transitory. In early 2022, the Fed raised rates at the fastest pace in its history to curtail Inflation and regain credibility, though it didn’t cut its balance sheet meaningfully to remove the liquidity, which was the underlying cause of elevated inflation. The Fed was doing delicate balancing, hoping that higher rates would check inflation and excess liquidity would support growth. This strategy could have been sustained had there been no accidents. Unfortunately, the SVB crisis opened a Pandora’s box.
This story is from the April 2023 edition of Investors India.
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This story is from the April 2023 edition of Investors India.
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