The question that everyone is grappling with now is whether the bank run crisis will be a flash in the pan or have lasting impacts on the economy?
Citi today offered an early indication and there were real impacts:
“This was the first week of [Citi credit card] data following the disruption within the financial sector, and we were curious if it might have had an impact on the consumer. It sure did. .. biggest decline in total retail spending .. since the pandemic began (April 2020).”
Naturally, that's just one week but a cooling in March data will also spill over into inflation and the general tightness in the economy. That comes at the same time as oil prices have fallen and some extremely-favourable year-over-year comps start to hit the inflation numbers.
It's a reason the Fed can afford to be cautious today but officials may also be cognizant that they have a chance to squash out inflation right now and that by playing it safe, they may be stoking inflation down the line.
