Powell defends that the US bank is in good health and is ensuring the “necessary tools” for its stability

Powell defends that the US bank is in good health and is ensuring the “necessary tools” for its stability

Jerome Powell, Chairman of the US Federal ReserveIt was made clear in a press appearance after the meeting that the corporation decided to raise interest rates by 25 basis points. The central bank governor affirmed that the country’s banks are in good shape despite the recent turmoil, though he guaranteed that You will use “all necessary tools” to ensure its stability.

“Our banking system is sound and resilient, with strong capital and liquidity,” the Fed chairman insisted, after three entities — Silicon Valley Bank, Signature Bank and Silvergate — went bankrupt in less than two weeks, and another, First Republic Bank, had to be bailed out. by other banks.

In his speech, Powell considered these recent events It could lead to tougher credit terms for households and businessesDespite the fact that “deposit flows have stabilized.”

Although “it is too early to say the extent of these effects and therefore too early to say how monetary policy will respond,” the institution implements “Deep review” to see if regulation needs to be strengthened.

The institution opened An investigation into the management and oversight of a Silicon Valley Bank (SVB) whose conclusions will be known on May 1st. The review will be in-depth and transparent. He warned that we need to strengthen oversight and regulation.”

[Janet Yellen abre la puerta a extender a más entidades la protección de los depósitos aplicada con SVB]

content,”BLS management Failed miserablyAnd Considered Powell, who highlighted that “the supervisors saw the risks and intervened” and that their only interest was to determine what went wrong.

In any case, the central bank governor argued that “There are no widespread vulnerabilities in the banking systemSVB was anomalous, so “its collapse does not point to broader weaknesses in the banking system.”

As Powell explained, “The velocity of deposit flows from the SVB was very different from what was seen in the past,”Suggests the need for potential regulatory and oversight changes“.

Powell also noted that the Bank for Term Funding Program (BTFP) was launched by the Foundation It is an efficient solution to the liquidity needs of entities. The goal of the program is for banks to have the capacity to meet the needs of “all depositors”.

interest rates

When asked about the upcoming interest rate hikes, the Fed Chairman answered so The institution will increase the reference rates if such increases are necessary. However, he has indicated that they are focusing on it for the time being Possible credit tightening.

Powell noted that “in principle, banking tensions can be seen as a rise in interest rates,” while stressing that “Poor credit conditions likely mean a less stressful job“.

[La Fed y el BCE asumen que la inflación no bajará al entorno del 2% hasta al menos 2025]

Since the last meeting, economic data has been stronger than expected, but we believe that recent developments in the banking sector will lead to a tightening of credit conditions. It will affect the economy and how we need to respond.”

In the same sense, he noted, the expectations of the members of the organization are “not a pre-plan”. On the contrary, the foundation’s roadmap “will be adjusted accordingly” from then on Those responsible for monetary policy will make decisions “meeting by meeting””, based on the economic data that became known.

High inflation

Powell repeated The Fed “remains firmly committed” to its target of lowering inflation to 2%. Without low inflation, he warned, “the economy doesn’t work for anyone.”

And inflation, while moderate for eight consecutive months, reached 6% in February“still too loud”. In his opinion, although the rise in prices has “slowed somewhat”, “recent readings indicate that inflationary pressures remain high.” “Wage growth has shown some signs of improvement, but demand still outstrips supply,” he noted.

Because of this, he cautioned that there was still a way to bring inflation back to 2%. This reduction has been considered, “It will require below-trend economic growth.”

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