SVB Collapse
It’s Low Rates, Not Fed Tightening, That Caused SVB Collapse
- Years of accommodation spawned an indifference to rates
- Complacency about tightening likely have played into it
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When any entity in the global economy goes under, it’s traditional to blame policy tightening — and it’s no different following the collapse of Silicon Valley Bank.
But the truth is actually the opposite: it’s those low global interest rates for way too long that prevailed in the run-up and in the immediate aftermath of the pandemic that spawned complacency. When the top end of the Federal Reserve’s benchmark was a mere 0.25%, the European Central Bank’s policy rate was -0.50% and the Bank of England’s a mere 0.10%, it was easy to think that even a rebound in interest rates would be anemic.