OSLO, Norway–One Federal Governor is flatly rejecting any suggestion the Fed’s 14-month-long pace of rate increases played any role in the failure of three large banks and a resulting crisis in confidence.
Federal Reserve Board Gov. Christopher Waller said in remarks before a conference in Oslo, Norway, that tightened monetary policy was not in any way significantly responsible for those failures of Silicon Valley Bank (SVB) in California and Signature Bank in New York in March and First Republic Bank of San Francisco, Calif. (in May).
Waller said the Fed’s job isn’t to weigh the risks such rising rates have on banks and their interest rate risk.
“The Fed’s job is to use monetary policy to achieve its dual mandate, and right now that means raising rates to fight inflation,” Waller told the meeting. “It is the job of bank leaders to deal with interest rate risk, and nearly all bank leaders have done exactly that. I do not support altering the stance of monetary policy over worries of ineffectual management at a few banks.”
Still Pursuing ‘Goal’
According to Waller, the Fed will continue to pursue its monetary policy goals, “which ultimately support a healthy financial system,” but it will also continue to use its various tools to “prevent the buildup of risks in the financial system and, when needed, to address strains that may emerge.”
The conference was sponsored by Norges Bank, the International Monetary Fund (IMF), and the IMF Economic Review.
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