The Impact of Tightening US Monetary Policy in 2022-2023 on the Banking System

Student: Baroyan Anna

Faculty: Faculty of World Economy and International Affairs

Educational Programme: World Economy (Master)

Year of Graduation: 2024

In 2020-2022, the world experienced a lockdown caused by the COVID-19 pandemic. To support the economy, a loose monetary policy with near-zero interest rates was implemented for 2 years. However, in 2022, the world faced a new hurdle - high inflation. The jump in inflation rate forced central banks to change the course of monetary policy to tightening. Thus, in the US, the rate rose by 5.25pc by 2024. Such a sharp tightening did not pass without a trace for the US banking system: since the beginning of 2023 there has been a series of defaults of 5 banks, including one of the largest in the US - Silicon Valley Bank. There is an opinion that the main cause of the banking crisis in the US is the tightening of monetary policy. This paper investigated the impact of monetary policy tightening in 2022-2023 of the US on the banking system.

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