Fed policymakers, who are in a self-imposed blackout ahead of the May 2-3 Federal Open Market Committee meeting, have signaled they are on track to raise rates by a quarter point and signal a potential pause in June. Investors are pricing in more than three-quarters odds of a hike, down from 90% last week.

“The renewed stress raises some question-marks as to the notion that the acute phase of the bank stress is definitively over while highlighting the uncertainty and possibly material magnitude of credit tightening to come,” Guha and Williams said.

Fed officials who spoke last week had taken comfort in the absence of turmoil in the banking sector following the collapse of Silicon Valley Bank last month.

But several also cautioned that a tightening in lending standards intensified by the turmoil could weigh on spending and growth. That would potentially lessen the need for additional rate increases by effectively doing their work for them.

That view could need to be updated following a plunge this week in First Republic shares to a record low.

“We didn’t think the onset of stresses were likely to prevent the FOMC from hiking in March unless markets were in disarray very close to the announcement of the decision,” wrote former Fed Governor Laurence Meyer and his colleagues at research firm Monetary Policy Analytics.

“In this case the bar for putting off a hike for such a risk management consideration is, if anything, higher,” they said.