Said examination partly explains the decision of the US Central to postpone the rate increases at least until the next meeting to assess the situation of the financial system and the economy in general.
The changes in the credit conditions have been in line with the financial tightening of the Federal Reserve since the bankruptcy of Silicon Valley Bank in March, according to the entity’s governor, Christopher Waller.
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During a financial stability conference in Norway, Waller noted thatalthough banks have imposed stricter conditions for loans since March, these changes are in line with what banks have been doing since the Federal Reserve began raising interest rates over a year ago.
Waller stressed that financial tensions in the banking sector are a factor that he and his colleagues andthey are closely monitoring while determining the appropriate monetary policy stance for the future. He warned that the Fed could tighten too much if it does not consider the possibility that banks are tightening credit more than necessary to combat inflation, for fear of losing deposits or other liquidity stress.
However, Waller indicated that it is not yet clear whether the recent tensions in the banking sector have significantly intensified the tightening of lending conditions beyond what the Fed was already trying to achieve through its rate policy.
The first words after keeping rates
His remarks are the first by a US central bank official.e since monetary policy was stable this week. Although they also noted that they may need to increase higher-than-expected rates by the end of the year in order to reduce inflation, which is currently above target set at 2%.
Although Waller made no reference to the Fed’s upcoming July policy decision in his prepared presentation, his comments indicate a change in concerns about bank failures regional in the spring; that could tighten financial conditions significantly similar to Fed rate hikeswhich would increase the risks of going too far with the increments.
These considerations partly explain the Fed’s decision to postpone rate increases at least until the next meeting to assess the situation of the financial system and the economy in general.
Source: Ambito
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