SVB collapse & interest rates: What’ll the Fed do?

The Federal Reserve building is pictured in Washington, U.S.
The Federal Reserve building is pictured in Washington, U.S.
REUTERS/Leah Millis/File Photo

US markets rebounded Tuesday, temporarily calming fears that the collapse of Silicon Valley Bank might trigger a domino effect that makes both investors and ordinary Americans lose confidence in the banking system. But the uncertainty ain’t over yet.

With the stakes so high, who you gonna call? No, not those guys. We mean the Federal Reserve.

Many of SVB's problems can be traced back to interest rates, which are the Fed’s thing. If you lean right, you probably think SVB’s financial ruin is the result of near-zero rates that made lending too cheap. But if you’re on the left of the political spectrum, you likely blame the bank's demise on the Fed reversing that policy and jacking up rates too much, too fast, which pushed up the cost of borrowing and ultimately killed SVB’s balance sheet.

That's all water under the bridge. What matters now is the Fed's next move.

The US central bank will decide on March 21-22 whether to hike rates further or leave them be. And the Fed is coming under growing pressure to do the latter to calm down jittery investors, Americans worried about the safety of their deposits, and uneasy foreign markets.

On the one hand, a fresh hike would make sense because inflation — the whole reason to increase rates in the first place — remains too high. Indeed, the US Consumer Price Index, which dropped Tuesday, showed that year-on-year inflation eased last month to 6%. Not bad, but still far from the Fed's 2% target.

Yet, holding off (for now) on rate hikes might signal that the Fed is bullish on US regional banks surviving the SVB fallout. Also, the job market is still tight, which reduces the odds of a US recession in 2023.

Don’t forget: A lot has happened in the financial world since SVB crumbled last Friday. And a lot more can still happen by the time the Fed has to make its call.

More from GZERO Media

- YouTube

Fifty years after the fall of Saigon (or its liberation, depending on whom you ask), Vietnam has transformed from a war-torn battleground to one of Asia’s fastest-growing economies—and now finds itself caught between two superpowers. Ian Bremmer breaks down how Vietnam went from devastation in the wake of the Vietnam War to becoming a regional economic powerhouse.

Eurasia Group and GZERO Media are seeking a highly creative, detail-oriented Graphic and Animation Designer who lives and breathes news, international affairs, and policy. The ideal candidate has demonstrated experience using visual storytelling—including data visualizations and short-form animations—to make complex geopolitical topics accessible, social-friendly, and engaging across platforms. You will join a dynamic team of researchers, editors, video producers, and writers to elevate our storytelling and thought leadership through innovative multimedia content.

The body of Pope Francis in the coffin exposed in St. Peter's Basilica in Vatican City on April 24, 2025. The funeral will be celebrated on Saturday in St. Peter's Square.
Pasquale Gargano/KONTROLAB/ipa-agency.net/IPA/Sipa USA

While the Catholic world prepares for the funeral of Pope Francis on Saturday – the service begins at 10 a.m. local time, 4 a.m. ET – certain high-profile attendees may also have other things on their mind. Several world leaders will be on hand to pay their respects to the pontiff, but they could also find themselves involved in bilateral talks.

A Ukrainian rescue worker sits atop the rubble of a destroyed residential building during rescue operations, following a Russian missile strike on a residential apartment building block in Kyiv, Ukraine, on April 24, 2025.
Photo by Justin Yau/ Sipa USA
Members of the M23 rebel group stand guard at the opening ceremony of Caisse Generale d'epargne du Congo (CADECO) which will serve as the bank for the city of Goma where all banks have closed since the city was taken by the M23 rebels, in Goma, North Kivu province in the East of the Democratic Republic of Congo, April 7, 2025.
REUTERS/Arlette Bashizi

The Democratic Republic of the Congo and an alliance of militias led by the notorious M23 rebels announced a ceasefire on Thursday after talks in Qatar and, after three years of violence, said they would work toward a permanent truce.

Students shout slogans and burn an effigy to protest the Pahalgam terror attack in Guwahati, Assam, India, on April 24, 2025. On April 22, a devastating terrorist attack occurs in Pahalgam, Jammu and Kashmir, resulting in the deaths of at least 28 tourists.
Photo by David Talukdar/NurPhoto

Prime Minister Narendra Modi has blamed Pakistan for Tuesday’s deadly terrorist attack in Kashmir, and he’s takenaggressive action against its government.