Banks have shown some signs of pulling back on credit
following the recent turmoil, but that "could do some of the
Federal Reserve's work for them" on fighting inflation by
cooling activity.
Brainard said U.S. Consumer Price Index inflation data that
came in below estimates on Wednesday shows inflation easing but
more work was needed.
"The economy is actually on a good trajectory for inflation
to come down while growth continues at a moderate path," she
said.
(Reporting by David Lawder
Editing by Chris Reese, Kirsten Donovan)
(Adds quotes on bank stresses, inflation)
By David Lawder
WASHINGTON, April 12 (Reuters) - White House economic
adviser Lael Brainard said on Wednesday the U.S. banking system
is "sound" and stable after two bank failures last month, but
institutions that fail to show investors they are managing risks
effectively may come under market pressure.
Brainard, director of the National Economic Council, told an
event hosted by the Semafor news outlet that actions taken to
protect depositors in failed Silicon Valley Bank and Signature
Bank were "very targeted" on specific risks, adding that
discussions about broad changes to Federal Deposit Insurance
Corp limits are "on a slower track."
Brainard said that community banks should be exempted from
having to make up losses to the FDIC's Deposit Insurance Fund
from the SVB and Signature Bank failures because "they really
didn't contribute to this instability and that it would be a
disproportionate burden for them."
Asked if there would be more bank failures this year,
Brainard said that bank executives were responding to the recent
stresses and shoring up balance sheets and working to convince
depositors and investors that they "have a good strategy and are
managing risk effectively."
"If a bank is not effective in doing that, then I think, you
know, you might still see some investors really pushing harder,"
she said, pointing out that she did not see such pressures
leading to deposit runs.
Brainard, a Federal Reserve vice chair until mid-February,
said she believed that capital stress tests for rising interest
rates could have made a material difference in the case of SVB,
which had not had a single stress test.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.