Fed-funds futures traders priced in a nearly 1-in-3 possibility the Federal Reserve will leave rates unchanged at the end of its next policy meeting on March 22. Investors were weighing the fallout of last week’s collapse of Silicon Valley Bank, or SVB, after regulators on Sunday moved to make all depositors whole and avert a repeat of the bank run that brought down the institution. Regulators also made depositors at Signature Bank whole, after the New York-based institution was closed down on Sunday. Fed-funds futures reflected a 31.4% chance the Fed leaves its benchmark rate unchanged at 4.5% to 4.75% at the end of its next meeting, and a 68.6% chance of a 25 basis point, or quarter of a percentage point, rise, according to the CME FedWatch tool. That’s a big turnabout from last week, when traders had briefly priced in a better-than-70% chance of a half-point increase. Economists at Goldman Sachs, in a note late Sunday, predicted the Fed would leave rates unchanged at the March meeting due to worries about stress in the banking system. They left unchanged their expectation that the Fed will deliver 25 basis point rate hikes in May, June and Julyl, lifting the fed-funds rate to a peak of 5.25%-5.5%, while noting they “see considerable uncertainty about the path.”
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