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American retail banking keeps its pulse and rises after the latest rate hike

Date: October 1, 2023 Time: 14:38:28

Pacwest and Western Alliance gain momentum after the storm. The two entities have come to be in the spotlight of the market after the purchase by JP Morgan of the assets of First Republic Bank, without a strong punishment yesterday. However, this ‘crash’ has dissipated for now with rebounds of 3.6% and 2.26%, respectively, giving oxygen to the prices of these two firms, which have become collateral victims. It should be noted that the increases with which they have started the day have lost strength, although they remain in the green after the Federal Reserve’s announcement to raise rates by 25 basis points.

The good tone is also repeated in other banking values ​​such as Zions Bancorp (+1.5%) or Keycorp (+1.18%) or US Bancorp (+0.33%). In general, green is the one that rules among the financial sector, in which Bank of America (+0.43%), Citigroup (+0.74%) and Wells Fargo (+1.52%) also stand out. On the contrary, Goldman Sachs (-0.2%) and JP Morgan (-0.88%) cut. The behavior is in line with that registered by the main indices of the New York Stock Exchange with the Nasdaq as the protagonist (+0.74%), followed by the S&P500 (+0.52%), while the Dow Jones remains in doubt. (+0.09%).

The Federal Reserve (Fed) of the United States has announced a new rise in interest rates, of 0.25 points, which places them in a range between 5% and 5.25%, the highest level since 2007 The increase, the Tenth in just over a year, it is in line with what was predicted by analysts and comes in a context of high banking stability. In the statement, the Federal Open Market Committee of the Fed (FOMC, for its acronym in English) did not clarify if this could be the last before taking a break due to the instability of the banking system in the US.

“In assessing the appropriate monetary policy stance, the Committee will continue to monitor incoming data for suggestions for the economic outlook,” the statement said. Thus, the FOMC will take into account “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial factors.” The Fed is “prepared” to adjust the monetary policy stance “as appropriate” if “risks arise that would prevent the achievement of the targets” of bringing inflation to 2%, the statement added. The US body has made a brief reference to the banking situation, ensuring that “the US banking system is solid and resilient”.

Similarly, the Fed has explained that, after the ten consecutive rate hikes since March 2022, economic activity expanded “at a moderate pace in the first quarter.” Job creation “has been strong in recent months and the unemployment rate has remained low,” while “inflation remains high,” he said. At their previous meeting, in March, the members of the Committee decided to raise rates by just a quarter of a point given the uncertainty unleashed by the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank and the rescue of First Republic Bank. Although the causes of the bankruptcy are extensive, the investigation into what happened suggests that its financial situation worsened due to the agency’s monetary policy.

First Republic. The crisis will appear again after the US bank JPMorgan Chase announced the purchase of the entity, but nothing ensures that new critical episodes in the banking sector will not arrive.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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