US Federal Reserve Governor Jerome Powell confirmed on Wednesday that depositors’ money is “safe” in US banks, while the global banking system is in turmoil following the collapse of US banks.

And Jerome Powell recalled at a press conference that the American banking system is solid, underlining that the Federal Reserve is “determined to learn the lessons” of what happened. “We will continue to monitor the situation closely… and stand ready to use all available tools to keep this money safe,” he added.

The central bank of the USA. UU. raised interest rates by a quarter of a percentage point for children, as expected, continuing with its policy of maintaining a high inflation streak despite the turbulences in the banking sector that could affect the economy.

The decision was taken unanimously. With this increase, the interest rate is now between 4.75% and 5%, the highest since 2006.

Likewise, the Federal Reserve expected inflation this year to be slightly higher than expected in December, from 3.6% to 3.5%, and gross domestic product to contract by 0.4% from 0.5% in 2023. and 1.2% compared to 1.6% in 2024.

The central bank also warned in a statement that the recent banking crisis “is likely (…) to affect economic activity, employment and inflation”, noting that “the extent of these effects is uncertain”.

However, he reiterated that “the US banking system is solid and resilient” and that the committee responsible for monetary policy “remains attentive to inflation risks”.

Federal Reserve officials predicted additional rate hikes in the coming months, citing “additional tightening measures” without elaborating.

mixed expectations

And expectations for US interest rate hikes have fluctuated widely in recent weeks, between expectations that they will rise sharply following Powell’s comments on inflation and expectations that they will not rise due to the fallout from the recent banking crisis.

The collapses of Silicon Valley Bank (SVB), Signature Bank and Silvergate sparked a wave of anxiety. Governments, central banks and regulators urgently intervened to restore confidence in the banking sector and prevent panic from spreading.

But Swiss bank Credit Suisse, which has been in trouble for years, paid the price and was acquired by Swiss bank UBS on Sunday.

“Rebuilding Trust”

Calm appears to have returned to the financial sector since Tuesday. After two sessions in which European equity markets rallied, those markets hovered around balance on Wednesday.

“Pressure on banking sector bonds appears to have eased as regulators take steps to restore confidence,” said Rubila Farooqi, chief economist at specialist HFE Group, but did not rule out a “fear” risk. About the new bankruptcy”.

And the Federal Reserve in a few days lent some 164,000 million dollars to US banks so that any customer who wanted to withdraw their money could do so, except 142,800 million dollars for two entities created by the US regulator that obtained it. Two bankrupt banks.

Contrary to the Fed’s anti-inflation measures, these loans increased its balance by $297 billion, an amount it has been trying to reduce since June.

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“A rate hike today would be a mistake,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, “because the Fed has done enough to bring inflation back to target and we cannot know whether the threats against the banking system are over. ” “

Especially since the collapse of these banks was due to the increase in Federal Reserve interest rates, which skyrocketed at an unprecedented rate since the early 1980s, a period of very high inflation that the United States was experiencing.

The US central bank is under increasing pressure from the European Central Bank to raise interest rates by 0.50 percentage points on Thursday, although it confirms that it will not compromise price stability and financial stability.

The president of the European Central Bank, Christine Lagarde, said this Wednesday that the recent tensions surrounding the banking sector represent “new risks” for the economy, at a time when the bank still has “a long way to go” to combat high inflation.

In the UK, inflation rose to over 10% in February, mainly due to rising prices for fresh food amid the cost of living crisis.