The emergence of Covid has encouraged remote working around the world, including the United States. But after just three years, the 50% who chose to introduce flexibility in their working hours had fallen by 50%. But the remaining percentage caused an unprecedented decline in the value of offices, the buildings that support the balance sheets of banks scattered across the country. “Despite the shadow of the 2008 crisis hanging over the industry, the Federal Reserve (Fed) chairman was quick to discount the possibility of a repeat of the banking crisis sparked by the housing market more than a decade ago: the balance sheets of the largest banks, and this appears to be a manageable problem,” he emphasized to CBS In an interview with the news program ‘Sixty Minutes’, he noted, however, that “there will be some banks that will have to close or merge because of this.” “I think these will be mostly smaller banks,” he emphasized.
Powell explained that some smaller and regional banks have “concentrated” their exposure in these areas and therefore face a challenge, but that the Fed is working with them to prevent a new collapse. Two months remain after Silicon Valley Bank’s one-year decline, which culminated in the acquisition of First Republic Bank by JP Morgan and Credit Suisse by Fed Chairman UBS He admitted that he caught them off guard. Following the banking crisis, the central bank spent “a lot of time” working on ways to make supervision more effective and also “adapt” regulation to the modern context.
Regarding future interest rate cuts, currently in the 5.25%-5.5% range in the US, Powell assured: You must act “carefully”. “Growth is running at a solid pace, the labor market is strong, and with an economy this strong, we think we need to carefully consider the question of when to start reducing interest rates,” he said in one of his interventions. Last Thursday, a day before the latest employment data was released, the country’s unemployment rate stood at 3.7% for the third consecutive month, with 353,000 net jobs created; This figure is well above the average of 255,000 jobs created per month in 2023. .
The Central Bank President reiterated that they continue to bring inflation back to 2%, in line with their previous public statements. The Fed’s latest decision a week ago comes ahead of the release of US GDP, which ends 2023 with 3.1% growth spurred by consumer spending. Interest rate cut is nearbut not as much as the markets think. Powell said that “almost all” of the 19 members of the Federal Open Market Committee, which is responsible for deciding whether to raise interest rates, “believe that raising the interest rate would be appropriate in the most likely case.” “this year.” reduced”.
In his view, this committee is unlikely to reach that level of confidence in time for its March meeting, which is seven weeks away. “The next committee vote will be in May,” he recalled. That doesn’t mean the Fed will wait until we reach 2 percent inflation before cutting interest rates: “That’s certainly not what we’re saying. We’re committed to getting inflation back to 2 percent over time, but We will not wait to reach 2 percent for interest rate cuts” he assured.
Public debt and upcoming elections
Although the agency has tried not to comment on US fiscal policy, Powell said “in the long run, The US is on an unsustainable fiscal path“, because the debt is growing faster than the economy. This is an issue that worries the Fed’s apparent chairman, because “we are borrowing from future generations.” After several headaches, the US Senate managed to approve the debt bill. Just three days after the government ran out of money, June 2, 2023 ceiling in .
Central Bank’s decisions It will affect this year’s electionsIt was planned for nine months. And the specter of Republican Donald Trump returning to the nation’s presidency is already lurking. “If we try to bring a bunch of political factors into these decisions, it can only lead to worse economic outcomes,” Powell said, noting that they always put politics aside.