There are no clear signs of a credit crunch in the economy following the collapse of Silicon Valley Bank, New York Fed President John Williams said Monday.
“We haven’t seen any clear signs yet of credit conditions tightening,” Williams said, during a meeting with students at New York University.
There have been periods in the past where banks have hunkered down and it has affected spending and employment, he said.
The Fed doesn’t know if this will happen or how big the effect will be, and it will continue to monitor the data, he said.
Figuring out whether credit tightening can be a substitute for Fed interest-rate hikes is not a simple equation, Williams added.
Some Fed officials have said the banking stress raises the risk of recession. Others at the Fed have argued they have other tools to ease bank stress and that will allow the central bank to focus on containing inflation.
“Overall, the extent to which the turmoil impacts the real economy over the next couple of months will be a major determinant of the Fed’s upcoming policy decisions,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank, in a note to clients.
The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.416%
rose slightly to 3.42% in trading on Monday.
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