(MENAFN) St. Louis Fed President James Bullard has announced that US regulators are prepared to take further action as necessary, in response to the recent sudden failure of multiple banks in the country. Speaking at a presentation titled 'Financial Stress and the Current Macroeconomic Outlook' to Greater St. Louis Inc, a non-profit investor-supported organization, Bullard stated that financial stress has been increasing in recent days. However, he also noted that macroprudential policy response has been swift and appropriate, in light of the closing of three US banks – Signature, Silvergate and Silicon Valley – and the sale of Credit Suisse to UBS with Swiss government assistance.
Bullard's comments come after the Fed's decision to raise its benchmark interest rate by another 25 basis points on Wednesday, despite US banks facing serious financial turmoil. This has carried the federal funds rate to between 4.75% and 5% – the highest since May 2006. In terms of the Fed's monetary tightening and rates hikes, Bullard acknowledged that "inflation remains too high, but it has declined recently." He believes that continued appropriate macroprudential policy can help contain financial stress, while appropriate monetary policy can continue to put downward pressure on inflation.
The recent bank failures in the US have raised concerns about the stability of the financial system, and the potential impact on the wider economy. However, Bullard's comments suggest that regulators are closely monitoring the situation and are ready to take action if necessary. The Fed's decision to raise interest rates may have been seen as a risky move given the current instability in the banking sector, but Bullard's reassurance that regulators are prepared to take further action could help to alleviate concerns and restore confidence in the financial system.
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