US Deposit Safety Assured by Jerome Powell: Intervention Measures Ready, as Needed

US central bank President Jerome Powell confirmed Wednesday that depositors’ money is “safe” in US banks, while the global banking system is seeing turmoil after the collapse of US banks.

During a press conference following the Monetary Policy Committee meeting, Powell said the US banking system is sound, stressing that the Federal Reserve is “determined to take lessons” from what happened.

“We will continue to monitor the situation closely… We are ready to use all available tools and will intervene if necessary to keep these funds safe,” he added.

He continued: “Individual bank problems can threaten the banking system if not addressed.”

He stressed that “inflation is still high and we are still committed to reducing it to 2%, and measures to reduce inflation will take a long time”.

Powell revealed that the Fed’s baseline expectations do not point to a rate cut questyear, adding: “If necessary, we will raise interest rates to a higher rate.”

In the opinion of the Federal Reserve, the takeover of “Credit Suisse” seemed to be a positive outcome.

The US Federal Reserve’s Open Market Committee decided on Wednesday to raise the federal funds rate by 25 basis points, in a range of 4.75% to 5%, in in line with market expectations.

The Fed said in a statement that he was about to temporarily halt interest rate hikes in light of the recent turmoil in financial markets, spurred by the collapse of two US banks.

The US central bank added that inflation remains high, but the banking system is “healthy and resilient”.

The decision was made unanimously. With this increase, the interest rate is at its highest level since 2006.

The Fed has predicted the rate of inflation questyear will be slightly higher than expected in December, at 3.6% versus 3.5%, while it expected GDP to fall 0.4% versus 0.5%.

Markets are focusing on how the Fed will assess the repercussions of the banking crisis and hence its upcoming policy of raising interest rates to protect the economy and continue to control inflation.

The Fed raised the interest rate 7 times in 2022, in meetings in the months of March, May, June, July, September, November and December.

The Fed raised interest rates by 25 points in February 2023, with 6 more meetings remaining in the year and the next meeting will be held on May 3.

The Fed cut the pace of rate hikes by 50 points last December and 75 points in November, indicating the success of the Fed’s aggressive campaign to slow inflation.

Before the monetary tightening campaign, the interest rate in March 2022 was between 0.25% and 0.50%.

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