US Federal Reserve Chairman Jerome Powell said the US economy slowed sharply last year, but the US labor market is still strong.
“We are ready to use all tools to ensure the safety of the banking system, and our goal remains to return inflation to the target level of 2%,” the Fed chairman added during a press conference.
“The US banking system is safe and sound,” Powell continued, explaining that housing activity remains weak due to rising interest rates, and recent events are likely to tighten credit conditions for households and companies and affect economic activity. . employment and inflation. The extent of these effects is unclear. The Committee remains very attentive to inflationary risks.
The head of the US Federal Reserve said: “We are working with all our might to protect our banking system, and the problems of individual banks can threaten the system, and based on future scenarios, we will see what steps to take next.”
Jerome Powell affirmed that all US bank deposits are safe, reaffirming his pledge to keep working to bring inflation back to the 2% target while maintaining the integrity of the banking system.
According to a statement posted on the Federal Reserve’s website, recent signs point to modest growth in spending and production. In recent months, job growth has rebounded and is strong, while unemployment remains low and inflation remains high.
Powell said: “The US banking system is strong and has been supported to reassure all depositors. We must learn the lesson and prevent these events from happening again. Inflation is still high and we shouldn’t ignore it, and there are signs of declining wage growth and high interest rates.” Weak growth prospects are putting pressure on the economy.”
And the chairman of the Federal Reserve continued: “We expect inflation to fall to 3.3% by the end of the current 2023, then fall to 2.5% at the end of 2024 and reach 2.1% in 2025. go to lower inflation.
Speaking about the recent banking crisis, he said: “The recent banking crisis will have an impact on the economy as a whole and on stakeholders, but at the moment we do not know the magnitude of this impact. But we must deal with it, and in order to reduce inflation, we must low growth.”
Commenting on the Silicon Valley banking crisis, Powell said: “The Silicon Valley Bank has handled the crisis poorly and has not handled the risks of higher interest rates and low liquidity properly and has not received the right advice. at Silicon Valley Bank, and we’re doing a sector-wide survey to explore the site and get answers.”
He added: “In most periods of meetings, everyone was inclined to increase interest, but recent events have caused a state of uncertainty. All we are trying to do at the moment is to protect the banks from the infection of bankruptcy. We need a complete overview of the current banking system and the various banks.” The crisis is not about raising interest rates. Many banks managed to cope with the increase in interest rates. Inflation is declining, but the pace of falling prices for goods, services and the real estate sector is weak.
He pointed out that “the Fed’s statement revealed a state of uncertainty about future expectations after banking pressure, and areas for monetary tightening on the back of current credit and banking conditions may shrink. We cannot speak with certainty about the consequences of the banking crisis. has happened since a very short time and we are still looking into the situation.”
Powell stressed that the US banking system is strong, deposits are safe, and liquidity is good following our decisions.
“We are not going and do not expect a rate cut in 2023,” the Fed chairman added.
Source: Federal Reserve System.
