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(Bloomberg) — The case for the Federal Reserve to forgo an interest-rate hike strengthened in the eyes of some central bank watchers on Sunday following a coordinated global move to ease growing financial strains.

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Ahead of the weekend, most economists had been forecasting that the Fed would raise its benchmark rate by a quarter percentage point on Wednesday, to a range of 4.75% to 5%, extending a yearlong campaign to stamp out inflation.

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On Sunday afternoon, however, the Fed and five other central banks announced action to boost liquidity in US dollar swap arrangements by increasing the frequency of access to daily from weekly — echoing actions taken during other moments of crisis.

While US stock futures and Treasury yields climbed in the initial hours of trading following Sunday’s news, and investors increased bets on a quarter-point hike, several analysts said the risk-benefit calculations around a pause were becoming more favorable to such an option.

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“The fact that you are engaged in global coordination with other central banking authorities to rescue institutions and keep liquidity flowing, it just suggests that a pause is probably a better risk/reward,” said Julia Coronado, president of MacroPolicy Perspectives LLC and a former Fed economist.

The central bank could signal that its “intention right now is focused on stabilizing the liquidity in the banking system,” she said.

The latest news followed UBS Group AG’s agreement Sunday to buy Credit Suisse Group AG in a government-brokered deal aimed at containing a crisis of confidence that threatened to spread across global markets.

And it all came on the heels of the collapse of three US lenders a week ago, developments that effectively took a 50 basis-point hike — something floated by Chair Jerome Powell earlier in the month — off the table.

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The Fed was joined by the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank in announcing the coordinated action. 

Contagion Concern

To be sure, the decision on whether to pause or hike remains a tough call, and analysts weren’t immediately changing their prediction, but rather indicating that the chances of a pause seemed to have increased following Sunday’s developments.

The various actions on Sunday “suggest greater worry about the left-tail risk from financial contagion, and on the margin could put (our presumption of) a rate hike by the FOMC on Wednesday in a bit more doubt,” former Fed governor Laurence Meyer and his colleagues at research firm Monetary Policy Analytics said in a note Sunday night.

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“The higher risk of pausing also suggests higher risk that the FOMC would revise downward or suspend balance sheet runoff, especially if policymakers think recent stress sends a definitive signal of reserve scarcity at the aggregate, systemic level rather than only at the level of individual banks,” they wrote.

Data released Thursday showed banks in the US borrowed a record amount from Fed backstop facilities in the week ended March 15, topping a previous high reached during the 2008 financial crisis and signaling widespread funding strains.

Fed officials start a two-day meeting on Tuesday. With inflation holding firm and the labor market still hot early this year, some policymakers including Powell had suggested it may be appropriate to re-accelerate the pace of rate increases to a half-percentage-point hike from the 25-basis-point pace officials delivered the last time they met on Feb. 1.

But that was before Silicon Valley Bank’s failure and the resulting market turmoil.

A 25 basis-point hike was “still our base case,” Evercore ISI analyst Krishna Guha, a former New York Fed staffer, said in a note Sunday evening. “But the FX swap flags US global concerns and if we were to see a severe adverse reaction in European financials to the news this could stop out a hike.”