Minneapolis Fed's Kashkari Says Unclear On Impact Of Banking Stresses On Economy – 'Have To Do Less Work With Federal Funds Rate...'

Federal Reserve Bank of Minneapolis President Neel Kashkari reportedly said the banking system is resilient with a strong capital position, a lot of liquidity, and the full support of regulators but indicated it’s unclear how much of an impact the stresses are going to have on the economy.

Kashkari told CBS News in an interview there are other banks that have some exposure to long-dated treasury bonds with some duration risk on their books. "We also know that commercial real estate, there are a lot of commercial real estate assets in the banking sector. And there are some losses that will probably work their way through the banking sector. So that process will take time to fully become clear. But fundamentally, the banking system has a lot of capital to be able to withstand those pressures," he said.

Also Read: Best Penny Stocks

Although markets witnessed volatility last week in the wake of the ongoing banking crisis, major indices closed in the green for the week. The SPDR S&P 500 ETF Trust SPY closed 0.66% higher last week and the Invesco QQQ Trust Series 1 QQQ gained 0.37%.

Economy: The Minneapolis Fed President also said it's unclear how much of the banking stresses are leading to a widespread credit crunch and added that the central bank is monitoring it very closely. "Now, on one hand, such strains could then bring down inflation. So we have to do less work with the federal funds rate to bring the economy into balance," he stated.

Kashkari also asserted the biggest banks in the world are still too big to fail and said the reason behind deposits flowing to large banks and Credit Suisse Group AG CS getting bailed out by the Swiss government is that banks have a premium position. "It’s an unfair playing field that puts enormous pressure on regional banks and community banks, and that needs to be addressed. We need regional banks in America, we need community banks in America," he said.

Read Next: IMF Chief Believes Risks To Financial Stability Have Risen, Calls For Continued Vigilance