Powell Says the Banking System is 'Sound,' but Markets Don't Agree

WSJ Opinion: Potomac Watch

The Wall Street Journal

Society & Culture, News

4 • 2.7K Ratings

🗓️ 4 May 2023

⏱️ 25 minutes

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Summary

The Federal Reserve raises interest rates for the tenth time in 11 months, and Chairman Powell says the banking panic is over. But investors are still punishing midsize banks after the First Republic failure. Plus, who'll blink first in the debt-limit showdown? Learn more about your ad choices. Visit megaphone.fm/adchoices

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0:09.5	NetSuite by Oracle. Go to NetSuite.com slash Wall Street. That's NetSuite.com slash Wall Street.
0:19.3	From the opinion pages of the Wall Street Journal, this is Potomac Watch.
0:24.1	The Federal Reserve raises interest rates again, and another regional bank runs in the trouble
0:31.1	after the failure of first Republic Bank earlier in the week. Is the banking system as safe and
0:37.0	reliable as regulators say it is? Plus, could the Federal Reserve itself become an issue in the
0:43.5	presidential campaign? Vavak Ramaswamy wants to make it one. The Republican presidential candidate.
0:50.4	So, could he do so? Welcome. I'm Paul Gigo with the Wall Street Journal.
0:54.8	Editorial page, and I'm here with my running mates, Kim Strassel, and Joe Sternberg.
1:01.3	First, let's talk about the Fed decision to raise rates to five and five and a quarter percent.
1:06.4	That's the tenth increase in 11 months. Seems reasonable to me that they did so with hints that
1:12.7	this will be the last increase for a while, not a firm commitment that there's a pause in
1:18.8	raising rates, but the market seemed to think so. Kim, I don't know. What do you think? Are you
1:24.0	feeling that this is the proper position to take, given the relative decline in inflation here in
1:30.5	recent months? I think it's at least reasonable. Look, if you go back to the last Fed meeting in March,
1:37.4	they suggested that they were going to do at least one more, maybe two. There had been a lot of
1:42.6	pressure on them, including political pressure to not even do this one, to stop just earlier this
1:49.4	week, but prior to J. Powell giving his talk yesterday, you had a group of Senate and House
1:55.4	progressives that all came out, Elizabeth Warren, Bernie Sanders, just hammering the Fed, saying that
2:01.6	the Fed's monetary policy strategy is triggering a recession. It's going to throw millions out of
2:07.2	work. It's going to crush small businesses. So, the political pressure was there. Wall Street was
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