Federal Reserve press conference, 2023-03-22 — Chair Jerome Powell

Question (Colby Smith, Financial Times): Thank you. Colby Smith with the Financial Times. How confident is the Committee that the recent stress that we’ve seen, and you’ve alluded to, is contained at this point and that deposit flight among midsize lenders in particular has ceased?
Answer: Thanks. So I, I guess our view is that the banking system is sound and it’s resilient—it’s got strong capital [and] liquidity. We took powerful actions with [the] Treasury and the FDIC, which demonstrate that all depositors’ savings are safe and that the banking system is safe. Deposit flows in the banking system have stabilized over the last week. And the last thing I’ll say is that we’ve undertaken—we’re undertaking a thorough internal review that will identify where we can strengthen supervision and regulation.

Question (Steve Liesman, CNBC): Mr. Chairman, can you explain the difference between ongoing rate increases and firming? Does firming imply a rate increase per se, or could policy firm without you increasing rates?
Answer: No, I think it’s, it’s meant to refer to our policy rate. Really, I would focus on, on the words “may” and “some,” as opposed to “ongoing.” Ongoing. So we, we clearly were—what we were doing there was taking onboard the—trying to reflect the uncertainty about what will happen. I mean, it, it’s possible that this will turn out to have very modest effects—that these events will turn out to be very, very modest effects on the economy, in which case inflation will continue to be strong—in which case, you know, the path will look— might look different. It’s also possible that this potential tightening will contribute significant tightening in credit conditions over time and, in principle, if that—that means that monetary policy may have less work to do. We simply don’t know. So.

Question (Greg Robb, MarketWatch): Thank you, Chair Powell. Greg Robb from MarketWatch. I was wondering if you could give us a little bit more color. You gave just a little bit of color. You said during the first week of the Silicon Valley weekend—you said the question you guys asked was “How did this happen?” when you saw Silicon Valley Bank. So I was wondering if you could go to the Credit Suisse merger. I mean, wasn’t that the big gorilla in the room? Aren’t— didn’t you breathe a sigh of relief when that merger happened? Thanks.
Answer: Sure. So, you know, we—that was really the Swiss government that we of course were, were following it over the course of the weekend, and we were engaged with their authorities in the way that you would expect, all the ways that you would expect. It seems to have been a positive outcome in the sense that the transaction was agreed to, and it has been— the markets have accepted it, and it seems to have gone well, and I think there was a concern that it might not go well. So coming into the middle of this week, yes, I would say that that is going well so far.

Question (Jean Yung, MNI): Hi, Chair Powell. Jean Young with Market News. I just wanted to ask, with all the events of the past two weeks, do you still see a possibility of a soft landing for the U.S. economy?
Answer: You know it’s, it’s too early to say, really, whether these events have had much of an effect. It’s hard for me to see how they would have helped the possibility—but I guess I would just say, it’s too early to say whether there really have been changes in that. You know, the question will be how long this period is sustained. The longer it’s sustained, then the greater will be the likely declines in—or tightening in credit standards, credit availability, so we’ll just have to see. I do still think, though, that there’s a—there’s a pathway to that. I think that pathway still exists and, you know, we’re certainly trying to find it.

Question (Jennifer Schonberger, Yahoo Finance): Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. Curious—how do you view financial conditions right now? If credit becomes expensive enough, choking off growth, as you said you’re watching for, would that situation warrant a rate cut? What situation would warrant a rate cut? And have the bank failures prompted any discussion around changing the implementation of the balance sheet runoff? Thank you.
Answer: So we haven’t really talked about changing the balance sheet implementation—that’s not something we’ve discussed yet. As I mentioned, we’re always willing to change that if we conclude that it’s appropriate, but we’re really not seeing any signs there. Sorry, then the question before that was, just give me a—