- Title: Federal Reserve's Powell: Focus remains on inflation-fighting amid bank turmoil
- Date: 22nd March 2023
- Summary: WASHINGTON, D.C., UNITED STATES (MARCH 22, 2023) (UNRESTRICTED POOL) FEDERAL RESERVE CHAIRMAN JEROME POWELL ARRIVING AT NEWS CONFERENCE (SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN POWELL SPEAKING ABOUT THE HEALTH OF THE U.S. BANKING SYSTEM AFTER THE COLLAPSE OF SILICON VALLEY BANK IN RECENT WEEKS, SAYING: "Our banking system is sound and resilient with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound. In addition, we are committed to learning the lessons from this episode and to work to prevent episodes…events like this from happening again." REPORTERS LISTENING TO POWELL AT NEWS CONFERENCE 4 (SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN POWELL SAYING: "Since our previous FOMC meeting, economic indicators have generally come in stronger than expected, demonstrating greater momentum in economic activity and inflation. We believe, however, that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond. As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation. Instead, we now anticipate that some additional policy firming may be appropriate. We will closely monitor incoming data and carefully assess the actual and expected effects of tighter credit conditions on economic activity, the labor market and inflation." (SOUNDBITE) (English) REPORTER ASKING POWELL A QUESTION SAYING: " I wonder, you know, how can the American people have confidence that there aren't other weaknesses out there in the banking system, given that this one got missed, as you noted?" (SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN POWELL SAYING: "So let me let me say what I think happened and then I'll come to the questions around supervision. So at a basic level, Silicon Valley bank management failed badly. They grew the bank very quickly. They exposed the bank to significant liquidity risk, and interest rate risk didn't hedge that risk. We now know that supervisors saw these risks and intervened. We know that the public saw this. We know that SVB experienced an unprecedentedly rapid and massive bank run. So this is a very large group of connected depositors, concentrated group of connected depositors in a very, very fast run, faster than the historical record would suggest. SIDE VIEW OF POWELL SPEAKING (SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN POWELL SAYING: “My only interest is that we identify what went wrong here. How did this happen? Is the question. What went wrong? Try to find that. We will find that and then make an assessment of what are the right policies to put in place so that it doesn't happen again and then implement those policies.†WHITE FLASH (SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN POWELL SPEAKING ABOUT AN INTERNAL REVIEW OF THE BANKING CRISIS, SAYING: "The review is going to be thorough and transparent. It is clear to you, really to your last question, it's crucial that we do need to strengthen supervision and regulation. And I assume that, you know, there will be recommendations coming out of the report and I plan on supporting them and supporting their implementation." REPORTER ASKING POWELL A QUESTION (NOT A SOUNDBITE) (SOUNDBITE) (English) FEDERAL RESERVE CHAIRMAN POWELL SAYING: "We're very focused on getting inflation down, and because we know in the longer run that that is the thing that will most benefit the people we serve. That's how we can have a long you know, we've had very strong labor markets through these long expansions that we've had….four of the five longest are three of the four longest expansions in U.S. history have been really since the high inflation period, and the reason was inflation wasn't forcing the central bank to come in and stop an incipient or, you know, an expansion. You can have very, very long expansions without high inflation, and we had several of those, and they're very good for people. You see late in expansion, you see low unemployment, you see the benefits of wages going to people at the lower end of the wage spectrum. It's just a place that we should try to get back to." REPORTER LISTENING TO POWELL POWELL CONCLUDING HIS NEWS CONFERENCE SIDE VIEW OF POWELL EXITING NEWS CONFERENCE
- Embargoed: 5th April 2023 20:50
- Keywords: Banks Federal Reserve Interest rates Jerome Powell Markets News conference
- Location: WASHINGTON, D.C., UNITED STATES
- City: WASHINGTON, D.C., UNITED STATES
- Country: US
- Topics: Economic Events,North America
- Reuters ID: LVA001949122032023RP1
- Aspect Ratio: 16:9
- Story Text: The Federal Reserve on Wednesday (March 22) raised interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets spurred by the collapse of two U.S. banks.
Fed Chair Jerome Powell opened his post-meeting news conference with remarks focused on the recent banking crisis, seeking to reassure depositors, consumers and businesses that the system was sound after the spate of actions that the central bank and other regulators have taken in the last two weeks.
The Fed chief said officials "are prepared to use all of our tools as needed to keep it safe and sound."
The turmoil, however, probably will take a toll on growth and the economic outlook, he said, with recent events likely to result in tighter credit conditions for households and businesses.
In a key shift driven by the sudden failures this month of Silicon Valley Bank (SVB) and Signature Bank, the Fed's latest policy statement no longer says that "ongoing increases" in rates will likely be appropriate. That language had been in every policy statement since the March 16, 2022 decision to start the rate hiking cycle.
With it being too soon to determine the results of those effects, Powell said it was appropriate to proceed with a rate hike at this meeting but also to no longer say that "ongoing" rate increases were appropriate.
The outcome of the latest two-day policy meeting marks an abrupt repositioning of the central bank's strategy from just two weeks ago, when Powell testified in Congress that hotter-than-expected inflation would likely force the central bank to raise interest rates higher and possibly faster than expected.
But Powell said the central bank continues to keep its focus on bringing down inflation "because we know in the longer run that that is the thing that will most benefit the people we serve."
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