Submitted by notbrokemexican t3_11xpj09 in wallstreetbets
So some of you folks are keenly aware of how unintuitive game theory can be and it often results in scenarios where the unlikely is actually pretty likely.
From the perspective of the fed, disruption for mismanaged money in finance and tech (two sides to the same coin in this economy) is the natural order of aggressive hikes - large or small the federal reserve is the root of the tree and can absorb consequences of its decisions.
So inflation is the problem, and the issue with inflation is that it inherently amplifies other economic conditions which cause continuous ripple effects. Many current post-Covid economic events are pretty predictable - war, bank runs, food costs, labor restructurings, aggressive government actions etc.
Inflation makes the consequence of everything less manageable, and from the perspective of the fed, economic game theory, it makes most sense to control for the unknowns. In the past it was the rate of development and distribution of vaccines, today it’s inflation.
So yea. SVB failing made it MORE likely for a 50bps hike not LESS. We will likely see 25bps.