(Ticker) – “We have considered a stop to rate hikes in the days leading up to the meeting, but today’s decision was supported by a broad consensus, given that macroeconomic data were strong before the latest events”. The Fed chairman said, Jerome Powellin the press conference that followed the decision to raise interest rates by 25 basis points to 5%.
“THE Banking problems could equate to higher rates or more, but we can’t judge at this point,” he added. Powell stressed that the guidance had been changed from “ongoing hikes” to “some additional hikes,” explaining that “perhaps a tightening of policy might be appropriate.”
The impact of the banking turmoil on thecredit tightening it will likely be “quite real” and you’ll need to “pay attention to that,” said the central banker, who also stressed that the new language in the statement is meant to convey uncertainty about how these banking problems will affect the economy.
Pressed on the issue, Powell said the Fed was not tying its hands on forward rate guidance, in effect expecting another rate hike: “If we need to raise rates higher, we will. I think for now though, as we’ve said, we see the likelihood of credit tightening.”
Speaking of recent events, Powell said “the sThe US banking system is solid, not least because we took quick action and strong, and so deposit flows have stabilized over the past week. We will continue to monitor the condition of the system closely and are ready to use all of our necessary tools to keep it healthy.”
Also, focusing on the SVB failuresaid that “we are committed to learning lessons from this episode and to work to prevent episodes of events like this from happening again”, he added, highlighting that SVB’s management has “failed badly”, expanding the bank very quickly and exposing clients to “significant liquidity risk and risk of interest rate”.