Notable economist Ed Hyman of Evercore ISI said the Federal Reserve should consider pausing interest rate hikes in part because of the financial shock that has developed with Silicon Valley Bank . “It might be a good idea for the Fed to pause,” wrote Hyman in a note Sunday, citing the SVB failure along with slowing inflation data. “If the Fed were to pause and inflation were to accelerate, they could easily tighten again.” The Fed hiked rates eight times in the last 12 months and was expected to do so again on March 22. As the Silicon Valley Bank crisis unfolded Friday, investors quickly reduced their bets for a half percentage point hike at that meeting and instead see just a quarter-point increase . The Dow Jones Industrial Average posted its worst week since June and the 2-year Treasury yield posted its biggest 2-day drop since the financial crisis as SVB financial was shut down last week and regional bank shares tumbled in sympathy. “Financial shocks/crises are part of tightening cycles and resulting business cycles. We are having one,” wrote Hyman. Regulators Sunday are reportedly conducting an auction for Silicon Valley Bank and traders hope that if part of the plan includes making most of the depositors whole, investors will calm down and the stock market can recover. Though Hyman said it may not be that easy and a Fed pause may be what it ultimately takes to stabilize markets. The economist points out that it took five weeks for the Fed to cut rates after Long Term Capital Management imploded in 1998. “During those weeks, the S & P declined 5%,” noted Hyman. “So even if we’re at a turning point, we may not be out of the woods. It may take the Fed a month to react.” —With reporting by CNBC’s Michael Bloom
