It's like a horror film for Jerome Powell and the Federal Reserve as the villain resurfaces one more time.
The banking crisis was slowly fading into the rearview mirror but yesterday's revelations from First Republic showed that it needs outside help for some kind of resolution. If it's not cleaned up, we could see a new round of bank stress and worse credit availability.
Pricing in the Fed funds futures market is now 75% for a May 3 hike with the remainder at 'no change'. For the June 14 meeting there is no hike priced in and the year-end level is 4.336%, which would be a swift drop from 5.00-5.25% after next week's meeting.
I tend to think this is an overreaction but -- as we saw in March -- bank runs are psychologically-driven and panic can set in quickly.