The Fed will continue to rise despite the banking crisis, predicts the former Richmond Fed chief

The Fed will continue to rise despite the banking crisis, predicts the former Richmond Fed chief

Former Richmond Federal Reserve President Jeffrey Lacker believes the Fed should and will stand firm on raising interest rates at its upcoming meeting in March and subsequent meetings.

Despite a series of bank failures this month, caused in part by rising interest rates, the ex-chairman believes more will be needed to combat inflation.

The inflation battle continues

In one (n interviewAlong with Squawk Box's Andrew Sorkin, Lacker said the Fed "should proceed with a 25 basis point hike" when the Federal Open Markets Committee (FOMC) wraps up its meeting on Wednesday to show its conviction in its anti-inflation cause.

However, such an increase would be in line with market expectationsCME Fedwatch toolshows that markets are pricing in an 18.8% chance of no rate hike.

“To pause now would send a signal of concern and concern and convey that they know things are worse than people on the outside think,” Lacker said. “I take Jay Powell seriously.”

Following the collapse of Silicon Valley Bank earlier this month, the Federal Reserve has taken several measures to shore up liquidity for the banking system and prevent further bank runs.

But critics of their actions suggest that their actions reverse much of the progress they made in reducing the money supply over the past year. BitMEX co-founder Arthur Hayescalledlast week that he viewed his new bank term funding program as a “repackaged” form of quantitative easing and an informal “pivot.”

Billionaires Elon Musk and Bill Ackman recentlycalledthe Fed formally moves to lower interest rates to stabilize the banking system. However, Lacker believes that the “banking crisis” is not as serious as others would like.

"My guess is that people are moving deposits from one bank to another... The banking system as a whole will hold on to those deposits," he said called. “As a result, I don’t see any dramatic change in loan terms.”

Lacker added that the Fed has “separate tools” to address credit problems that do not involve changes in monetary policy, the latter of which may only exacerbate inflation, as was the case in the late 1990s.

Hyperinflation on the way?

Bitcoiners like Strike CEO Jack Mallers remain confident that the Federal Reserve will be forced to abandon its fight to reduce inflation to 2%. Speaking to CNBC on Monday, Mallers claimed that the US dollar is entering a new era of perpetual inflation of 5% to 10%.

Similarly, former Coinbase CTO Balaji Srinivasan placed $2 millionbetlast week that Bitcoin would hit $1 million in the next 90 days due to hyperinflation.

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