Fed insider Timiraos highlights Powell highlighting bank collapses tightening impact

Folks, in you haven't caught onto this already, this is a pay attention moment.

We've been banging the drum on this since SVB crumbled. The gist of it is, via Goldman Sachs:

• the effect of tightening would have the same impact on demand growth as would an interest rate hike of 25 to 50 basis points

What is this 'tightening'? More from that GS note I cited last week:

• "Small and medium-sized banks play an important role in the US economy,"
• "Any lending impact is likely to be concentrated in a subset of small and medium-sized banks."
• GS analysts assume that small banks with a low share of FDIC-covered deposits will reduce new lending by 40%
• other small banks will reduce new lending by 15% leading to a 2.5% drag on total bank lending

The Wall Street Journal's Nick Timiraos amplified Fed Chair Powell on just this:

Powell's remark was:

• "So, financial conditions seem to have tightened and probably by more than the traditional indexes say. Because the traditional indexes are focused a lot on rates and equities. And they don't necessarily capture lending conditions"

BoA cited this reasoning in their updated forecast:

• BoA have cut its terminal Fed Funds forecast to 5 - 5.25% (from 5.25 - 5.5%)