SVB collapse may prompt Fed to go slow on rate hikes

(Reuters) – Traders no longer expect a rate hike of 50 basis points by the U.S. Federal Reserve next week as the surprise collapse of lender SVB Financial Group rattles the banking sector.

The current projection is for a 25 bps move, with some even expecting no hike at all.

That is a quick reversal in expectations after a sharp fall in weekly jobless claims and hawkish commentary from Fed Chair Jerome Powell had prompted traders to see a near 70% chance of a 50 bps rate hike.

Following are rate expectations from major Wall Street Banks:

Bank Current expectation Expectation before SVB

crisis

March hike Terminal March Terminal rate

(in bps) rate hike

(in

bps)

Goldman No hike 5.25% – 5.5% 25 5.5% – 5.75%

JPM 25 5% – 5.25% 25 5% – 5.25%

Citi 50 5.5% – 5.75% 50 5.5% – 5.75%

BofA 25 5.25% – 5.5% 25 5.25% – 5.5%

Morgan 25 5.12% 25 5.125%

Stanley

Barclays (LON:) 50 5.5% – 5.75% 25 5.25% – 5.5%

NatWest No hike N/A 50 N/A

(This story has been refiled to fix typographical error) 

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