- Jim Bianco commented that the sudden fall in interest rates would help cease the deposit flight and financial instability.
- Bianco added that it would however result in inflation the next year.
- It was reported that despite the massive withdrawal of deposits, the Fed called the banking system ‘sound’.
Jim Bianco, the President, and Macro Strategist at financial research institution Bianco Research LLC shared his opinion on the Federal Reserve’s interest relaxations to confront the current financial instability and turmoil. He posited that though the immediate drop in the interest rate helps cease the deposit flight, it could result in the next year’s inflation.
Notably, on March 26, Bianco tweeted via his official page that the sudden fall in the interest rates could create a “massive stimulus for the economy and push inflation to 9% next year”:
Significantly, Bianco’s comment was a response to the CNBC editor Jeff Cox, who wrote on his official page that even after traders withdrew nearly $100 billion in deposits from banks, the “regulators call the system ‘sound’”.
According to the data released by the Federal Reserve on March 24, customers have been pulling out almost $98.4 billion since March 15 with regard to the volatile crux that shook the financial sector after the banking companies’ debacle.
However, it was after the release of the report, that Fed Chair Jerome Powell and other officials convened together for the Financial Stability Oversight Council. A statement from the council read:
The Council discussed current conditions in the banking sector and noted that while some institutions have come under stress, the U.S. banking system remains sound and resilient. The Council also discussed ongoing efforts at member agencies to monitor financial developments.
Interestingly, there were a variety of opinions among investors and traders regarding the withdrawal of deposits despite the sudden drop of crypto rates. Even the crypto exchange Binance CEO Changpeng Zhao came forward with the comment that “banks need crypto”, following the related reports and tweets.