Banking crisis threatens – Jim Cramer holds "drastic measures" the Fed for possible

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• Banking crisis is spreading
• The ECB has stuck to its monetary policy course
• Jim Cramer highlights importance of next Fed meeting

Investors suffered the first shock at the beginning of March when the US financial group Silvergate Capital, which specializes in cryptocurrencies – voluntarily announced its own liquidation – burdened by the ongoing slump on the crypto market. Shortly thereafter, the financier SVB Financial, which specializes in small and medium-sized tech companies, also got into trouble. However, the attempt to avert the crisis with a capital increase failed. However, the bad news for the US banking sector did not end there. For example, the Signature Bank in New York, which had gotten into trouble, was closed by the authorities and the regional bank First Republic also stumbled in the face of liquidity concerns.

In view of this, the monetary watchdogs are faced with a dilemma as far as their future interest rate policy is concerned. It is now a matter of “weighing up combating inflation versus maintaining financial stability,” explained the President of the Ifo Institute for Economic Research, Clemens Fuest. Because if the central banks deviate from their announced course, they would give “a problematic signal” of concern to the financial marketsbut at the same time eased the situation for the banks.

Central banks in focus

The monetary authorities of the euro have already made their decision and continued their fight against high inflation on March 16 despite the recent turbulence on the financial markets. The key interest rate was again raised sharply by 50 basis points to 3.5 percent.

The determination of the European Central Bank (ECB) to achieve its medium-term inflation target of 2 percent, according to statements by its President Christine Lagarde not eased. Nevertheless, the ECB has not committed itself to further rate hikes in the future, which gives investors hope for a more moderate pace in the near future.

Market participants are now eagerly awaiting the US Federal Reserve’s monetary policy meeting on Wednesday. After the ECB indicated the possibility of an interest rate pause last Thursday, the majority on Wall Street only expects a rate hike of 25 basis points for the Fed meeting. In addition, more and more market observers are now assuming that the US monetary authorities will then take a break in their rate hike cycle in view of the tense situation in the banking sector.

Jim Cramer: Fed could take drastic action

Meanwhile, stock market expert Jim Cramer was very concerned about the current situation in the banking industry on his investment show “Mad Money”, but also sees opportunities for investors: “We are close to a point where the Fed might consider it necessary to take drastic measures that could be fantastic for your stocks, for your portfolios,” is the assessment of the former hedge fund manager. “However, we do not know whether this will be enough to offset the negative effects of the rapidly spreading banking crisis,” he added. “This will be the most significant Fed meeting in recent memory because the next action is so important and we don’t know what it will be,” he said.

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