Last Sunday, one of the US’s Fed President said banking crisis had taken US closer to a recession, which is not good. When it comes to the US economy, confidence is vital. However, the banking crisis has threatened to upset how most feel about their financial picture.
Federal Bank President thinks the recession is near
Neel Kashkari, this year’s one of the four US Federal Bank presidents, stated that the current baking crisis had taken the US closer to a recession. Last Sunday, he also predicted that the combination of depreciating long-dated securities held by banks and loans granted to the troubled office real estate market would become a reason for further losses in the financial sector.
He argued that capital markets have been freezing the banking sector’s perceived weaker regional leaders out of the credit system, depriving them of access to liquidity and increasing the chances that economic activity would shrink, potentially to the point of recession.
On Sunday, during the CBS: Face the Nation, Kashkari also said not all these stresses are behind them and expects this process to take some time. He added that sometimes it takes longer for all the stresses to work out of the system.
Neel Kashkari is one of this year’s four rotating regional Fed presidents with authority to vote on the policy-setting Federal Open Market Committee, also known as FOMC. The native Ohioan first rose to prominence at age 35 after then-Treasury Secretary Paulson handpicked him in Oct 2008 to administer the 700 billion USD in US taxpayer money to bail out banks under the TARP.
As per the Washington Post, Neel Kashkari and Paulson have also worked together at Goldman Sachs, where Paulson was the CEO but barely knew the investment banker Kashkari.
Kashkari previously also argued for Fed’s interest rate hikes
As you know, Neel Kashkari, one of the US’s Fed President, said banking crisis had taken US closer to a recession. In the past, he also repeatedly argued for interest rate hikes. He now considers it too soon to forecast the further path of interest rates with the crisis only two weeks old.
Kashkari also explained that the capital markets had been primarily closed for the past two weeks. If those capital markets remain closed because borrowers and lenders are nervous, then it would be correct to say that there will have a more significant imprint on the economy.
What are your thoughts on US Federal Bank President Neel Kashkari’s recent statement? Is increasing interest rates the correct way to fight inflation? Let us know in the comments below. And if you found our content informative, share it with your family and friends.
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