"The Fed is regaining their inflation credibility, slowly. As they get inflation closer to the target, their long-run rate will again serve as a credible anchor for yields."

Some leading indicators suggest a recession is coming, while other indicators suggest the economy is healthy. Whatever the FOMC does next week, messaging will be crucial.

The answer will play a major role in determining whether the Fed is steadfast in keeping rates elevated through year-end, or whether it cuts rates.

SVB's ex-CEO, Greg Becker, blamed the Fed's fast pace of interest-rate hikes and negative social media commentary for his bank's collapse.

"Overall, domestic banks have ample liquidity, ... [but] prime and tax-exempt money market funds, as well as other cash investment vehicles and stablecoins, remained vulnerable to runs."

Interest rates are expected to stabilize soon or even begin falling. The risk is that core inflation might not come down, and a second tightening cycle might be needed.

"In light of the heightened uncertainty and the emphasis on 'flexibility,' the March [FOMC] minutes offer very little guidance on the policy outlook going forward."

The 25 bps rate increase is a gamble that the banking crisis can be contained.