plunged amid concerns that regulators and central banks have yet to contain the worst shock to the banking sector since the 2008 global financial crisis.
For Erik Nielsen, group chief economics advisor at UniCredit in London, central banks should not separate monetary policy from financial stability at a time of heightened fears that banking woes could lead to a widespread financial crisis. Money markets in the U.S. also expect the Fed to pause. Fed funds futures traders on Friday were pricing in only a 20% chance that the Fed will hike rates by an additional 25 basis points in May, and an 80% probability it will leave the rate unchanged at 4.75% to 5.0%. They also see the Fed cutting rates to 3.94% by December.
For now, few investors see this year's events as a repeat of the systemic crisis that swept through markets in 2008, butthat another bank run could erupt if people believe U.S. or European regulators won't protect depositors.