Bank chaos has altered the fight against inflation — but the Fed says every tool is still on the table
Even after weeks of banking industry chaos, the head of the nation's central bank made one thing certain — he'll do everything in his power to keep fighting inflation.raising interest rates by 25 basis points
for the second time this year. It comes just weeks after federal regulators shut down Silicon Valley Bank and later bailed out its depositors. The collapse raised heightened scrutiny over the Fed's actions to ensure something like this can never happen again. During the Wednesday press conference following the FOMC's announcement, Fed Chair Jerome Powell was clear that he thinks the banking system"is sound and it's resilient" — but he noted that following SVB's collapse, there's heightened uncertainty over how its aftermath could impact the economy.
"So we also assess, as I mentioned, that the events of the last two weeks are likely to result in some tightening credit conditions for households and businesses and thereby weigh on demand on the labor market and on inflation," Powell said."Such a tightening in financial conditions would work in the same direction as rate tightening in principle. As a matter of fact, you can think of it as being the equivalent of a rate hike, or perhaps more than that.
"Of course," he added,"it's not possible to make that assessment today with any precision whatsoever."
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