Fed's John Williams Says Pace Of Rate Hikes Didn't Trigger Banking Crisis: 'Haven't Seen Clear Signs Yet Of Credit Conditions Tightening'

Federal Reserve Bank of New York President John Williams reportedly said on Monday that he doesn't think the pace of rate hikes caused the crisis at the two banks back in March.

What Happened: The vice-chairman of the Federal Open Market Committee was referring to the failures of Silicon Valley Bank and Signature Bank.

Williams stated he viewed the crisis at the two banks as unique in nature and unlikely to be a reflection of broader trends in the financial system, according to a Reuters report.

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The central banker said that while past episodes of financial sector stress indicate tightening of credit, “we haven’t seen clear signs yet of credit conditions tightening and we don’t know how big this effect will be” if it happens, according to the report.

U.S. markets closed mixed on Monday as investors and traders commenced the week on a cautious note ahead of the release of the consumer price inflation data on Wednesday that will decide the course of the Federal Reserve's next policy decision.

The SPDR S&P 500 ETF Trust SPY closed 0.1% higher while the Invesco QQQ Trust Series 1 QQQ lost 0.05%.

Inflation: Williams asserted he believes inflation will come down gradually over time and will cool to 3.75% this year and likely hit the 2% target by 2025. The Fed official said he also sees a gradual rise in unemployment from the current low of 3.5% to between 4% and 4.5%.

The New York Fed President said he is not concerned by market expectations of rate cuts even though the central bank currently has factored-in an additional rate hike this year.

“I don’t really worry about" the divergence, Williams said. “I think part of it is because there is an expectation among many market participants and economists that the economy’s going to slow even more than I expect,” he said, according to the report.

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