Minneapolis Fed Reserve president: SVB's failure could lead to "credit crunch"
MINNEAPOLIS – The president of the Minneapolis Federal Reserve Bank says he has faith in the banking system, but he's monitoring the impact of recent bank failures on future lending and inflation.
In an interview Sunday on CBS's "Face The Nation," Neel Kashkari weighed in on the fallout from the failure of Silicon Valley Bank. He said that banks holding commercial real estate assets could also see losses in the future. That could in turn lead to a "credit crunch," or drop in the money banks are able to lend.
RELATED: Banks are running scared. Is the Federal Reserve about to make things worse?
"This is something we are monitoring very, 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," Kashkari said. "But right now it's unclear how much of an imprint these banking stresses are going to have on the economy."
Kashkari said it's too early to determine any impact on inflation.
The Federal Reserve raised its key interest rate a quarter point on Wednesday, the highest level for the federal funds rate since 2007.