The failures of Silvergate Capital and Silicon Valley Bank (SVB) have not changed Oxford Economics’ baseline forecasts for GDP growth, inflation or policy rates. But they do highlight the risk that a severe tightening in financial conditions will have a material impact on growth — beyond what policymakers intend — and lower policy rate forecasts.
U.S. bank failures and announcements of new liquidity facilities may seem reminiscent of late 2007, but Oxford Economics thinks this time is very different. SVB's failure appears to stem from a confluence of a concentrated and flighty depositor base and mismanagement of its liquid asset portfolio. Other banks may have similar flaws, but it seems unlikely that these particular problems are widespread. On that basis, the Fed's introduction of the $25 billion
