The US Federal Reserve raised interest rates amid fears it could exacerbate financial turmoil following a series of bank failures.
The Federal Reserve raises its key rate by 0.25 percentage points, which qualifies the banking system as “sound and resilient”, the report says.
However, it warned that the impact of bank failures could weigh on economic growth in the coming months.
Two US banks – Silicon Valley Bank and Signature Bank – went bankrupt this month, partly due to problems caused by higher interest rates, according to a BBC report.
There are concerns about the value of bonds held by banks, as rising interest rates could reduce the value of these bonds. Noting that banks tend to hold large bond portfolios and suffer large potential losses as a result, he concluded that depreciation of bonds held by banks is not necessarily a problem unless they are forced to sell them.
Authorities around the world have said they believe defaults should not threaten public financial stability and distract from efforts to control inflation. Last week, the European Central Bank increased its key interest rate by 0.5 percentage points.
Federal Reserve Chair Jerome Powell said the Fed remained focused on fighting inflation. Described Silicon Valley Bank as an “outlier” in an otherwise robust financial system. However, acknowledged that the recent turmoil is likely to slow growth and the full impact is still unknown.
(With inputs from agencies)
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