Federal Reserve Bank of Minneapolis President Neel Kashkari said there are signs that last month’s turmoil in the banking sector following the collapse of Silicon Valley Bank is abating.
(Bloomberg) — Federal Reserve Bank of Minneapolis President Neel Kashkari said there are signs that last month’s turmoil in the banking sector following the collapse of Silicon Valley Bank is abating.
“I’m not ready to declare all clear but there are hopeful signs that these risks are now better understood and calm is being restored,” Kashkari said Tuesday during a town hall event at Montana State University in Bozeman.
Backstops set up by the Fed are helping provide reassurance, he said. The US central bank stood up an emergency facility immediately following SVB’s failure, which helped ease fears of more widespread contagion.
The Minneapolis Fed chief is a veteran of financial crises, and set up and managed the Troubled Asset Relief Program during the early months of the 2008-2009 crisis.
Kashkari, a voter on this year’s policy-setting Federal Open Market Committee, did not comment specifically on the path of policy, but said that changing the Fed’s 2% inflation goal would damage its credibility right now, when price increases are still well above that pace.
Policymakers have been increasing interest rates for a year, to the highest level since 2007, in an effort to cool inflation. They slowed the pace of increases, following four consecutive 75-basis-point increases last year, and have delivered quarter-point hikes at the last two meetings.
While there is a lot of uncertainty in the economy, Kashkari said he expects inflation to return to 2% sometime in 2024.
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