A March 20 editorial advised the Federal Reserve to pause rate hikes, noting that the central bank needs to reassure Americans that the banking system is secure. Without access to all the banks’ financial data, this could be imprudent advice. Of course, even if banks are healthy, the mere perception that they are not could lead to a bank run. The reverse is also true: If banks are not healthy, but they are perceived to be so, this could avoid a bank run.
Is it not possible that continuing rate hikes would be interpreted by the markets as the Fed having confidence in the banks’ health — so much so that the Fed believes the banks can withstand some further tightening?
Whatever the actual state of the banks’ health is, I would be wary of providing advice without full information.
Philip Young, Somerset