Experts weighed in on the recent collapse of two banking institutions and its potential impact on interest rate hikes.
The financial world is still grappling with the aftermath of the collapse of two banking institutions, putting the Federal Reserve under pressure ahead of its March meeting and the possibility of raising interest rate hikes.
“So when interest rates rise, the portfolio, the asset to the bank reduce in value because there being a lower rate than what the market is supporting now,” said Indraneel Chakraborty, Professor of Finance at the University of Miami.
The Consumer Price Index released Tuesday shows a 6% increase in prices over the year. Despite a slight cooling of inflation in February, prices remain high.
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Marcos Kerbel, a professor of finance at Florida International University, believes the Federal Reserve should continue increasing rates to halt this cycle and slow down the economy.
Experts say the recent bank failures have intensified concerns for regional banks, but according to Kerbel, the government's measures should help calm the markets.
For consumers worried about their money in the bank, experts say funds up to $250,000 are safe. For those with more than $250,000 in a single banking institution, they recommend considering putting their funds in different banks.
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Kerbel also warns about the risks of consumers being attracted to invest in cryptocurrencies like Bitcoin.
While housing prices remain high, there is some good news for potential homebuyers.
Mortgage rates have fallen in response to the recent bank turmoil, according to Mortgage News Daily. A recent report states the average rate on the popular 30-year fixed mortgage has dropped to 6.75%, a decrease from last week's high of 7.05%.
Lower mortgage rates could translate to lower monthly payments for homebuyers.
The experts NBC 6 Responds spoke to said the fed could either delay or skip their next interest rate hike in response to the recent financial turmoil, or opt for a more conservative quarter percent increase. Regardless, they said this process is necessary to combat inflation.
