Powell warns that further rate hikes may be unnecessary after recent financial instability

May 19. (EUROPE PRESS) –

Jerome Powell, Chairman of the United States Federal Reserve (Fed), has stated that the tightening of credit conditions induced by the recent financial tensions on account of the collapse of Silicon Valley Bank (SVB) and Signature Bank may make additional hikes unnecessary. interest rates.

“Although the financial stability tools have helped to calm the banking sector, the events that have occurred have, even so, caused a tightening in credit conditions that are likely to weigh on economic growth, hiring and inflation,” Powell explained in a statement. lecture this Friday in memory of Thomas Laubach, former Fed economist.

“Consequently, the rate may not need to rise as much as it otherwise would to meet our targets,” he added. However, Powell has warned that there is still “high uncertainty” in this regard.

The Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) already decided on May 3 to unanimously approve a rise in interest rates of 25 basis points, to place them at a target range of between 5% and 5.25%.

Unlike the last 25 basis point hike announced on March 22, that time the Fed did not mention that more interest rate hikes were necessary to subdue the rise in prices and bring inflation back to around 2%. In this way, it was speculated that there could be a possible pause in the increases.

In any case, the next possible revision of this figure will be announced on June 14, the day on which the Fed officials will meet again and will have to weigh the risks of continuing with their monetary tightening policy after the instability unleashed by the bankruptcy. of the SVB and which, for the moment, has been contained after the acquisition of the troubled First Republic Bank by JP Morgan.