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Traders had been betting that process would be relatively quick, allowing the Fed to reverse course and start easing the policy rate, now in the 5.00%-5.25%, as early as September. Friday's Labor Department report showing employers added 253,000 jobs last month and the unemployment rate fell to 3.4% put those expectations in doubt. "The Fed still has some work to do and the job market’s hot," said Ameriprise FInancial's chief market strategist Anthony Saglimbene. But by far the bigger bet is for the Fed to stand pat next month, and overall traders left bets on a September start to rate cuts intact. By December the Fed will have dropped its benchmark rate to about 4.2%, interest-rate futures prices suggest.

☆ Fed's Goolsbee: 'way too premature' to expect June rate hike
▼ + stars: | 2023-05-05 | by ( ) www.reuters.com time to read: +1 min

"We know that credit conditions like the ones we are seeing now in the past have been correlated with recessions, credit crunches," Goolsbee told Fox News. "It's way too premature to know what to do with monetary policy." Goolsbee voted with all other Fed policymakers on Wednesday to raise the Fed's policy rate by a quarter point to 5.00%-5.25%. Goolsbee on Friday said he is paying particular attention to credit conditions, given the recent failure of First Republic Bank and the troubles of other regional banks. "It has to give you some pause" about raising rates, he said, because tighter credit conditions are likely to slow the economy.

Top of mind: inflation and the impact of a credit tightening Fed officials feel is still evolving in the wake of both higher interest rates and a financial sector rattled by the recent failure of three U.S. banks. "The case of avoiding a recession is in my view more likely than that of having a recession," Powell said. The shift in the Fed's approach was reflected in U.S. interest rate futures, which showed broad expectations for no hikes at either of the central bank's next two policy meetings. U.S. stocks initially held onto gains after the release of the Fed statement, but fell later in the afternoon and closed lower. "With the word 'determining' in place of 'anticipating,' (it) is essentially telling the markets that the Fed is now on pause."

The unanimous decision lifted the Fed's benchmark overnight interest rate to the 5.00%-5.25% range, the tenth consecutive increase since March 2022. Because of that, Powell said it's too soon to say the rate hike cycle is over. Economic growth remains modest, but "recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation," the Fed said. The shift was reflected in U.S. interest rate futures prices, which showed broad expectations for no hikes at either of the Fed's next two meetings. "With the word 'determining' in place of 'anticipating' is essentially telling the markets that the Fed is now on pause."

The market swoon from what would be an unprecedented U.S. default would bludgeon away billions more in wealth. The cost to insure U.S. government debt against default has shot to the highest since the 2007-2009 financial crisis. All of that takes air out the economy's tires and could start to push up the unemployment rate, now at a historically low 3.5%. Some top economic policymakers like those at the Fed had predicted as early as last December that the unemployment rate would be roughly 1 percentage point higher by the end of 2023. A debt crisis and a default, even if only on some of the interest payments due each day, would move it forward, Bostjancic said.

Depositors had pulled $100 billion from accounts at the bank in the panic triggered by the SVB and Signature failures, imperiling its survival. Both SVB and Signature failed last month. Both SVB and Signature grew quickly in recent years, outpacing the ability of regulators to keep up, especially with shrinking resources. Regulators closed Signature two days after SVB was shuttered. Signature lost 20% of its total deposits in a matter of hours on the day that SVB failed, FDIC Chair Martin Gruenberg has said.

☆ U.S. bank deposits dip in latest week
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: 1 min

April 28 (Reuters) - Deposits at commercial U.S. banks dipped in the week ended April 19, signaling no fresh worries about bank safety of the kind that drove sharp outflows in the week immediately following the collapse of Silicon Valley Bank, data released on Friday by the Federal Reserve showed. Deposits at large U.S. banks fell to $10.61 trillion from $10.74 trillion a week earlier, on a non-seasonal basis. Deposits at small banks totaled $5.36 trillion, compared with $5.39 trillion. The seasonally adjusted measure of deposits, which take into account typical outflows of deposits including tax season, rose, suggesting the actual outflow seen at banks may not have been as large as usual. Reporting By Dan Burns and Ann Saphir Editing by Chris ReeseOur Standards: The Thomson Reuters Trust Principles.

Both SVB and Signature failed last month. Regulators shut SVB on March 10, a day after customers withdrew $42 billion and queued requests for another $100 billion the following morning. Both SVB and Signature grew quickly in recent years, outpacing the ability of regulators to keep up, especially with shrinking resources. Regulators closed Signature two days after SVB was shuttered. Signature lost 20% of its total deposits in a matter of hours on the day that SVB failed, FDIC Chair Martin Gruenberg has said.

☆ Factbox: Highlights from US regulators' reviews of SVB, Signature failures
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +4 min

Below are key details from the government's post-mortems, which underscore management failings at Silicon Valley Bank and Signature Bank and too-slow, too-soft responses from regulators. * In 2022, SVB failed to test its capacity to borrow at the discount window and did not have appropriate collateral and operational arrangements in place to obtain contingency funding, the U.S. central bank said. The New York-based bank's board of directors and management pursued "rapid, unrestrained growth" without adequate risk management. * The Fed's judgments of SVB were "not always appropriate" given that bank's weaknesses. A single examiner was responsible for reviewing the bank's interest-rate risk and investment portfolio, and in some cases, would also review liquidity and model risk management during a two-to-three-week timeframe.

☆ Fed calls for rules revamp in 'unflinching' review of SVB oversight
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +2 min

Fed Vice Chair for Supervision Michael Barr called the review "unflinching," describing the U.S. central bank's oversight of the Santa Clara, California-based bank inadequate and regulatory standards too low. * Silicon Valley Bank was "acutely exposed" to risks from rising interest rates and slowing activity in the technology sector in ways that senior leaders and its board of directors did not appreciate. * In 2022, SVB failed to test its capacity to borrow at the discount window and did not have appropriate collateral and operational arrangements in place to obtain contingency funding. * Fed supervisors discussed conducting an interest-rate risk review of SVB during 2022 but decided to prioritize other exams and defer it to the third quarter of 2023. * The level of Fed resources dedicated to its regional bank oversight "proved insufficient."

In what Fed Vice Chair for Supervision Michael Barr called an "unflinching" review of the U.S. central bank's supervision of SVB, the Fed said its oversight of the Santa Clara, California-based bank proved inadequate and that regulatory standards were too low. At the time of its failure, SVB had 31 unaddressed citations on its safety and soundness, triple what its peers in the banking sector had, the report said. Barr said as a consequence of the failure, the central bank will reexamine how it supervises and regulates liquidity risk, beginning with the risks of uninsured deposits. "Contagion from the failure of SVB threatened the ability of a broader range of banks to provide financial services and access to credit for individuals, families, and businesses," Barr said. The Fed is looking at linking executive compensation to fixing problems at banks designated as deficient on management so as to focus executives' attention on those problems, a senior Fed official said in a briefing.

☆ Traders firm up bets on Fed rate hike in May
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: 1 min

April 28 (Reuters) - Traders of futures tied to the Federal Reserve's policy rate on Friday firmed up bets the U.S. central bank will raise its benchmark rate a final time in May after the government reported core inflation rose 4.6% in March from a year earlier. U.S. short-term interest rate futures were down slightly after the report, reflecting about a 90% chance of a quarter-of-a-percentage-point rate hike in May. The current target range is 4.75%-5.00%. Reporting by Ann SaphirOur Standards: The Thomson Reuters Trust Principles.

☆ Highlights from the Fed review of SVB oversight
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +2 min

☆ Factbox: Fed, FDIC reviews of US bank failures to spotlight problems, fixes
▼ + stars: | 2023-04-27 | by ( ) www.reuters.com time to read: +6 min

On Friday the banks' regulators - the Federal Reserve and the Federal Deposit Insurance Corporation - will publish their accounts of what happened at both institutions, and propose fixes to prevent a repeat. The FDIC will also publish a separate report on deposit insurance by Monday. Barr has said the Fed's report will include confidential supervisory information, including citations and exam material not typically disclosed. DEPOSIT INSURANCEThe second FDIC report could provide insight into how officials are thinking about the role of deposit insurance, currently capped at $250,000 per depositor, in financial stability. "The most interesting thing I expect to see is what the FDIC recommends about the deposit insurance cap," Phillips said.

Signature Bank's failure took only marginally longer. "The number 36 has just been, you know, branded in my brain," Atlanta Fed President Raphael Bostic told Reuters earlier this month. "I think that any time you have a bank failure like this, bank management clearly failed, supervisors failed and our regulatory system failed," Barr told U.S. lawmakers in a hearing in March. "It's how do we allow a bank whose failure threatened the financial system to persist without being subject to more aggressive intervention?" "One thing for certain ... this was a very significant supervisory failure," Tarullo said at the Peterson Institute for International Economics event on Wednesday.

☆ US bank deposits, loans ticked down in latest week -Fed data
▼ + stars: | 2023-04-21 | by ( ) www.reuters.com time to read: +2 min

April 21 (Reuters) - Deposits at all U.S. commercial banks dropped in the second week of April, though at smaller banks deposits held steady in a sign of stabilization in the financial institutions hardest hit by deposit outflows after last month's failure of two large regional banks. Federal Reserve data released on Friday showed deposits at all commercial banks fell to $17.38 trillion in the week ended April 12, on a non-seasonally adjusted basis, from $17.43 trillion a week earlier. The drop was almost entirely at the top 25 banks, the data showed. A drop in deposits can leave banks with less capacity for loans, though there was little to show that in the Fed's data Friday. Loans and leases at all banks ticked down to $12.05 trillion from $12.06 trillion a week earlier.

[1/4] A view of the Park Avenue location of the First Republic Bank, in New York City, U.S., March 10, 2023. FDIC regulators had raised the specter of systemic risk from the failure of large regional banks months before the SVB and Signature Bank collapses, records reviewed by Reuters show. SECRETS REVEALEDThe Fed will release its report on SVB at 11 a.m. EDT (1500 GMT) on Friday. FDIC Chair Martin Gruenberg has not provided much detail about the supervision of Signature, which like SVB had grown rapidly in recent years. The Fed's inspector general will have a report on each bank in the third quarter.

☆ US bank deposits, loans ticked down in latest week, Fed data show
▼ + stars: | 2023-04-21 | by ( ) www.reuters.com time to read: +2 min

☆ Fed needs more speed on emergency lending: Waller
▼ + stars: | 2023-04-20 | by ( ) www.reuters.com time to read: +1 min

April 20 (Reuters) - The unprecedented speed at which depositors pulled their money from Silicon Valley Bank outpaced the ability of the Federal Reserve to act as lender of last resort, underscoring the need for faster processing of emergency loans, Fed Governor Christopher Waller said on Thursday. "That's the one thing about a bank run - it's a panic; once it stops, there's no real fundamental damage to the economy or the banking system per se." The Fed is currently undertaking a review of what led to SVB's failure, and what policy fixes might be needed to avert a repeat. Waller's comments on the need for speed at the Fed's emergency lending "discount window" suggests one potential fix. Reporting by Ann Saphir; Editing by Chizu NomiyamaOur Standards: The Thomson Reuters Trust Principles.

☆ Fed in discussions with banks about managing risks of AI: Waller
▼ + stars: | 2023-04-20 | by ( ) www.reuters.com time to read: +1 min

April 20 (Reuters) - The Federal Reserve has “regular discussions” with the banks it supervises about managing the risks associated with artificial intelligence, as more financial institutions utilize AI for customer service applications, fraud monitoring and underwriting, a top official at the U.S. central bank said on Thursday. In prepared remarks, Fed Governor Christopher Waller cautioned that although AI could bring new efficiencies to bank processes, it also involves novel risks, including difficulties detecting problems or biases in large datasets. Waller also said that so-called smart contracts – or self-executing transactions on the blockchain whose results depend on pre-programmed inputs — could hold “considerable promise” to modernize transaction settlements. Still, he noted that smart contracts also pose risks, such as cyber vulnerabilities and bugs. Reporting by Ann Saphir and Hannah Lang; Editing by Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

April 19 (Reuters) - U.S. economic activity was little changed in recent weeks as employment growth moderated somewhat and price increases appeared to slow, according to a Federal Reserve report published on Wednesday. Several Fed districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity, the report showed. In the San Francisco Fed district, where failed Silicon Valley Bank was located, "lending activity fell significantly in recent weeks amid higher interest rates and elevated uncertainty in the banking sector," the report said. "Banking contacts reported some movement in deposits but little change in credit availability following the collapse of Silicon Valley Bank," the Chicago Fed said. The Fed report noted that inflation pressures had moderated but remained widespread.

☆ Fed's Goolsbee says he is watching for other 'credit shoes' to drop
▼ + stars: | 2023-04-19 | by ( ) www.reuters.com time to read: +1 min

April 19 (Reuters) - Chicago Federal Reserve Bank President Austan Goolsbee said on Wednesday that after the failure of two large regional Fed banks last month roiled the financial sector, he is waiting to see "whether there are other credit shoes to drop." "Not in the crisis sense, but in the how much squeezing is going to be coming up from the bank side," Goolsbee said in an interview with American Public Media's Marketplace. "I think it’s going to matter for whether this economy is going to slow down." In the next two weeks, he said, he will focus on prices and credit. Reporting by Ann Saphir Editing by Chris ReeseOur Standards: The Thomson Reuters Trust Principles.

☆ Fed's Bowman sees potential for interbank digital dollar
▼ + stars: | 2023-04-18 | by ( ) www.reuters.com time to read: +1 min

April 18 (Reuters) - A so-called "wholesale" central bank digital currency could hold promise for the future settlement of certain financial market transactions and processing international payments, Federal Reserve Governor Michelle Bowman said on Tuesday. While a digital dollar could make sense for interbank transactions, there could be unintended consequences like disruptions to the banking system if the Fed were to design a central bank digital currency that would be directly available to the public, Bowman said in prepared remarks for an event at Georgetown University's Psaros Center for Financial Markets and Policy. The U.S. central bank has not yet said if it would embark on an effort to create a central bank digital currency, and has previously said it would seek authorization from Congress and the executive branch before doing so. Reporting by Ann Saphir and Hannah Lang; Editing by Paul SimaoOur Standards: The Thomson Reuters Trust Principles.

WASHINGTON, April 14 (Reuters) - The Federal Reserve's Board of Governors on Friday said it has approved UBS Group AG's acquisition of the U.S. subsidiaries of Credit Suisse, clearing another major hurdle for the completion of the Swiss-brokered rescue deal. UBS has committed to give the U.S. central bank an implementation plan for combining its U.S. business and operations with those of Credit Suisse within three months of consummating the deal, the Fed's Board said in a statement. UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.3 billion), a fraction of its earlier market value. UBS has said it expects the deal to create a business with more than $5 trillion in total invested assets. Under the takeover deal, holders of Credit Suisse AT1 bonds will get nothing, while shareholders, who usually rank below bondholders in compensation terms, will receive $3.23 billion.

☆ US bank deposits rose, loans ticked down in latest week -Fed data
▼ + stars: | 2023-04-14 | by ( ) www.reuters.com time to read: 1 min

April 14 (Reuters) - Deposits at U.S. commercial banks rose in early April, continuing a stabilizing trend after large outflows following last month's failure of two large regional banks and worries about the safety of the banking system as a whole. Federal Reserve data released on Friday showed deposits at all commercial banks rose to $17.43 trillion in the week ended April 5, on a non-seasonally adjusted basis, from $17.35 trillion a week earlier. Loans and leases ticked down to $12.06 trillion from $12.07 trillion a week earlier. Reporting by Ann Saphir Editing by Chris ReeseOur Standards: The Thomson Reuters Trust Principles.

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