Ron Insana, CNBC Senior Analyst and Commentator & Bestselling Author who was named as a top business journalist for the 20th century, worried about the US Federal Reserve’s plans to hike interest rates in the near future, a move that he believed would be a “major policy mistake” given the current economic climate in the US, with inflation coming down.

“In my experience, the Federal Reserve raises rates until something breaks,” he said, noting that the recent demise of Silicon Valley Bank and others a possible indicator that rates should not be increased further.

With central banks in Europe’s recent rate hikes and the Fed’s likely 1/4 per cent increase next week, Ron believed there would not be a pause or pivot in rate rises soon.

“I would expect that this is going to persist for some time until we figure out whether or not the problem has been contained, or whether or not we risk further contagion down the road,” he said.

Looking back on 2022 and ahead to the remainder of 2023, Ron believed the US economy was still effectively in the same cycle that it was in last year.

“It’s very difficult to extend your vision past the next couple of months,” he confirmed. “It’s really hard to make long term predictions in an environment where central banks are still tightening economic policy. There’s still some fall out from the pandemic; there’s still a war going on in Ukraine; and we still have a great deal of uncertainty about US/China relations.”

Ron said that once the economy sustained systemic risk then economic policy needed to change. The Silicon Valley Bank failure was the second largest banking failure in the history of the US, he advised, highlighting the fact that 93% of the deposits at Silicon Valley Bank were uninsured and that they had “all but abandoned deposit limits in the US banking system”.

Ron noted a senior treasury secretary as stating:

“…if another bank goes, there is no way they [the Fed] won’t treat that bank in the same way as Silicon Valley or Signature Bank in New York.”

“When you get to the point of systemic risk you should start talking about policy changes at the Fed,” he said. “That hasn’t happened yet, so we are in this kind of no man’s land.”

He stated it was not a similar situation to 2008 when the housing market led the crash; this was a very different situation: a classic run on a bank. The difference between the days of old and today was that people could withdraw funds on their phones, so things were moving at a much quicker pace now.

The Fed was terrified of making the same mistakes of the 1970s when interest rates eventually soared, but the economy was “radically different” today, with today’s economy echoing post-war economies, he said.

“On the labour front... we are also short of people. This is something the Fed simply can’t fix with higher interest rates… We are literally short of about 5 million workers in the US today. We’re seeing this in Europe... China... Japan – Japan is effectively a liquidating trust…”

But raising interest rates would be a big mistake, he felt.

“My concern is the Fed could make a mistake and drive the US economy into recession,” he feared.