US Federal Reserve Chairman Jerome Powell participated in a discussion about Monetary Policy Perspectives held by the Federal Reserve Board of Governors.
Jerome Powell, the Chairman of the US Federal Reserve, stated that the banking system in the country is robust and can withstand challenges. He assured that banks receive necessary liquidity support without affecting the Federal Reserve’s monetary policies. Powell also mentioned that the current state of credit stress might influence decisions regarding interest rate increases.
“Powell explained that the measures taken to ensure financial stability might have an impact on the economy, job opportunities, and inflation. Consequently, the need to raise the policy rate may not be as significant as previously expected in order to achieve their objectives”.
Powell Warns About Further Market Shocks
Powell mentioned that markets will continue to face challenges in predicting future market shocks, and this uncertainty will persist for a long time. He made these remarks during a panel discussion on monetary policy at a research conference hosted by the Federal Reserve Board of Governors. The discussion took place while there were mixed expectations in the crypto market regarding whether the US Fed would pause or maintain a more cautious approach in the upcoming June 2023 FOMC meeting.
Recent comments from central bank officials leaned towards increasing interest rates further. Interestingly, the initial remarks made by Powell had a positive impact on the price of Bitcoin. On the other hand, according to the CME FedWatch Tool, which predicts the target rate probabilities for June 14, 2023, there is a 69% chance of a pause in rate hikes.
During the panel discussion, former Fed Chair Ben S. Bernanke highlighted the recent crisis involving US regional banks, specifically mentioning the collapse of Silicon Valley Bank. He emphasized the ripple effect in the market, as the bank withdrawals caused widespread financial impacts on the US economy. Bernanke compared this situation to the Global Financial Crisis, stating that there were similarities. However, he also noted that borrowers are in a much better position now compared to the previous crisis, indicating an improvement in their financial stability.
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