Powell Sees Credit Tightening and Expresses Trust in Banks

Jerome Powell, the chairman of the Federal Reserve, addressed the recent instability in the US banking industry at the start of his post-meeting press conference.

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He claimed that over the past few weeks, the Fed as well as other regulators had taken appropriate emergency measures, and that the reserve bank was actively monitoring the situation. He minimized the problems by saying they only affected "a few banks."

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Powell repeated the Federal Open Market Committee's Wednesday afternoon policy statement when he said that the banking sector was "sound and resilient."

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Powell continued by saying that it was too early to predict how the banking pressures will effect the availability of credit in the American economy, but that it would probably have a negative impact on consumer spending as well as economic expansion. According to him, the effects may be "the equivalent of a rate hike or possibly more than that."

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The labor market and inflation figures since the last FOMC meeting were hotter than anticipated. Powell claimed that as a result, at its meeting this week and for later in the year, the committee has been considering higher rises in interest rates.

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Yet because Powell predicted that the banking instability would lead to tighter financial conditions, officials decided to raise interest rates on Wednesday by a quarter point.