The President of the Federal Reserve (Fed) from United States, Jerome Powell, anticipated, this Wednesday, March 22, that, as a consequence of the recent bank crisis, the rate increases dand interest may not be adequate to contain inflation.
(See: The Fed raises interest rates in the United States to 4.75% – 5%).
“Instead, we now anticipate that some additional policy firmness may be appropriate.“, said Powell in a press conference after the Fed announced an interest rate hike of 0.25 points, to a range rate of 4.75% and 5%.
Asked about the difference between a future rate hike and a policy tightening, Powell indicated that the focus should be on the word “power” as opposed to the rate hikes that have so far been “ongoing” in the central bank.
Despite the banking crisis, he stressed that the Fed remains “committed” to achieve a drop in inflation to the target of 2%. In this sense, he explained that reducing inflation will require a period of growth “below trend” and a moderation of labor market conditions.
(See: The ‘moral hazard’ that bank bailouts like the SVB would generate).
“Restoring price stability is essential to pave the way for maximum employment and stable prices in the long run.“, warning.
The Fed opted to raise rates by a quarter of a point, after the bankruptcy of two banks in recent weeks, Silicon Valley Bank (SVB) and Signature Bank, whose financial situation worsened due to the organism’s monetary policy, and the rescue of a third party to the First Republic Bank.
The panic also crossed the Atlantic and almost finished with the Swiss bankor Credit Suisse, which finally had to be acquired over the weekend by its competitor UBS after the crisis of confidence that was sinking its price on the market.
Powell assured in his appearance before the media that they will continue to closely monitor the conditions in the Bank System and will use “all the necessary tools” to protect it.
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“Our banking system is healthy, resilient, with strong capital and liquidity“, insisted the person in charge of the Fed. And he considered that the recent events could lead to stricter credit conditions for households and businesses.
He added that “it is too early to determine the extent of these effects and therefore too early to say how monetary policy should respond“.
Powell made it clear that they will closely monitor the available data and the real effects of tighter credit conditions on economic activity, the labor market and inflation when making new decisions.
On the other hand, he opined that the Fed needs “strengthen supervision and regulation“of the banking system.
(See: How the Silicon Valley Bank collapse differs from the 2008 crisis.)
“On a basic level, the management of Silicon Valley Bank failed miserably.“Powell pointed out, who stressed that”supervisors saw the risks and intervened“and that their only interest is to identify what went wrong
Continuing with the theme of banks, Powell insisted that the United States banking system “is healthy, resilient, with strong capital and liquidity“.
(See: Despite bankruptcy of three banks, Biden says that the system is ‘safe’).
And added that savers’ money in US banks Are you sure”.