According to Janet Yellen, US Treasury Secretary, a quick reaction of the authorities to the collapse of Silicon Valley Bank (SVB) helped stabilize the situation in the banking system.
In March, California’s regulators shut down SVB, which became America’s largest institution to file for bankruptcy since the 2008 financial crisis. The bank collapsed because it could not withstand the pressure created by the Federal Reserve's record pace of interest rate hikes.
The Treasury Secretary argued that outflows from regional banks stabilized thanks to decisive policy actions, which helped calm the banking crisis.
She also stressed that banks are likely to become more cautious and may tighten lending. She said that “could be a substitute for further interest rate hikes that the Fed needs to make.”
Yellen does not see any significant factors to change her economic outlook, which “remains one for moderate growth and a continued strong labor market with inflation coming down”.
