Speaking at a monetary conference in Washington, the central bank chief noted that the Fed’s initiatives used to deal with the problems of mid-sized banks have mostly halted the worst-case scenarios.
But he noted that problems at Silicon Valley Bank and others could ripple through the economy.
“Financial stabilization tools have helped ease conditions in the banking sector. On the other hand, developments there are contributing to tighter credit conditions and are likely to affect economic growth, employment and inflation. “, added Powell.
“As a result, we won’t need to raise interest rates to the high levels we previously targeted to fight inflation,” he said.
But he added: “Of course the extent of that is very uncertain at this time.”
Jerome Powell’s speech came as markets expected the Fed to pause the series of interest rate hikes it began in March last year at its June meeting .
Despite the above, Powell stressed that he understands the damage caused by high levels of inflation, pledging not to shy away from controlling the pace of price increases.
“Many people are experiencing high inflation right now, for the first time in their lives,” he said.
“We believe that failure to reduce inflation will not only prolong the pain, but will ultimately increase the social costs of returning to price stability, causing more harm to families and businesses, and we aim to avoid this by standing firm in the pursuit of our goals,” he added.
Market reaction
As soon as Powell’s statements were released, US indices reversed the gains the session had started with, only to head lower. At 16:08 GMT, the “Dow Jones” index fell 0.38% to 33,407 points, and the “S&P 500” index fell 0.22% to 4,188 points and the “Nasdaq” index fell 0.30% to 12,650 points.
Read the Latest World News Today on The Eastern Herald.
