Caracas.- The US Federal Reserve (Fed, central bank), moderately increased its reference rates by a quarter of a percentage point to 4.75-5.00% as expected by the market, still worried about inflation and despite the problems of the banking sector that could “weigh” on the economy.
He said that the problems in the banking sector “are likely to result in tighter credit conditions for households and businesses, and could weigh on economic activity, employment and inflation”, according to what was announced at the end of the monetary policy that was launched. Tuesday.
“The extent of the effects (of the banking crisis) is uncertain,” the central bank added.
In any case, he stated, “the US monetary system (is) solid and flexible.”
President Jerome Powell stated in a press conference after the release of the statement on Wednesday that all the money of the savers in the United States is “safe”.
Powell also emphasized that “lessons” should be drawn from this event and called for strengthening bank supervision and regulation.
– New future, new “act”
The FED has updated its economic forecast for the United States and now anticipates inflation to be somewhat higher than expected in December, 3.6% in 2023 compared to 3.5% initially forecast. The central bank will continue to “watch” the price.
The agency lowered its 2023 GDP growth to 0.4% from 0.5%.
The members of the Monetary Committee (FOMC), which met on Tuesday and Wednesday, agreed that there will be hikes in other coming months, although in their proposals they speak of “act additions to strengthen the monetary policy”, without specific mention. of denarii
– difficult balance
He held his meeting in March in the middle of a dilemma: to try to continuously raise the policy rate of his currency to contain inflation by taking credit more expensive and thus to contain consumption and investment, or to stop to avoid the more serious problems that the exposed banks are experiencing. it is important to him.
Markets were expecting a strong rise of half a percentage point in rates after statements by the agency’s president to predict stable rates after the turmoil in the banking system with three financial institutions going bankrupt in less than a week in the United States. City
Regional banks Silicon Valley Bank (SVB), Signature Bank and Silvergate have created a wave of concern. Governments, central banks and regulators intervened urgently to try to restore confidence in the system and avoid contagion.
Likewise, the Credit Suisse bank, which had already been in difficulties for years, was shaken up and bought last Sunday by its compatriot UBS.
H lent about $ 164 billion to banks for about ten days so that all customers who want to withdraw their money can do so. In addition, it borrowed 142.8 billion dollars from US regulators to manage the assets and resources of SVB and Signature Bank.
This boosted his credit balance sheet, which he had been trying to reduce since last June.
H was under pressure because the risk of these banks increased mainly due to the rapid and strong rate, which reduced the value of the assets of these institutions.
In addition, the European Central Bank is raising its rates by half a percentage point on Thursday, so that inflation is the number one priority.
In the United States, 12-month inflation rose to 6% in February, according to the Consumer Price Index (CPI).
After H was announced, the New York market fell sharply at the end of the session. As the day progressed, indexes fell minutes before closing: the Dow Jones finally lost 1.63%, the Nasdaq technology 1.60% and the S&P 500 1.65%.
The dollar meanwhile lost 1.05% at 19:15 GMT against the euro. Traders saw the announcement of H as a sign of relief.
