The U.S. Federal Reserve will raise interest rates by 25 basis points on March 22 despite recent banking sector turmoil, according to a strong majority of economists polled by Reuters who were divided on the risks to their terminal rate view.

Market pricing for the upcoming meeting has been on a roller-coaster ride, switching from expecting a 50 basis point move after Fed Chair Jerome Powell's testimony last week to a pause at one point following the failure of some regional banks.

U.S. two-year Treasury yields , which typically reflect near-term interest rate expectations, fell more than 80 basis points this week after the failure of Silicon Valley Bank, the largest bank collapse since the 2008 financial crisis.

But Reuters poll predictions for the March meeting ultimately held steady from last month, with 76 of 82 economists predicting a quarter-point hike in line with interest rate futures, bringing the federal funds rate to 4.75%-5.00%. (Reuters - Continue Reading)

Economists predict the European Central Bank will stop raising interest rates before they reach 4% — a scenario that was widely expected and priced in by investors until just a week ago.

The change in outlook comes after the collapse of Silicon Valley Bank in the US and troubles at Credit Suisse Group AG threw markets in a tailspin, raising the specter of a fresh financial crisis. The ECB on Thursday followed through on plans to raise borrowing costs by another 50 basis points though didn’t offer any guidance on the future policy path.

Banks including Goldman Sachs and Barclays now predict only two more quarter-point moves that would take the deposit rate to 3.5%. Morgan Stanley and ABN Amro are among those expecting a slightly higher terminal rate of 3.75%. (Bloomberg - Continue Reading)