1 of 2 | James Bullard, the chairman of the Federal Reserve Bank of St. Louis, said financial conditions are not as bad is during the so-called Great Recession. Photo courtesy of the Federal Reserve Bank of St. Louis.
April 6 (UPI) -- Following the collapse of U.S. banks, the chairman of the St. Louis Fed said Thursday that risks in the financial sector are low relative to the recession from 2007-2009.
James Bullard, the chairman of the Federal Reserve Bank of St. Louis, took the podium Thursday to address trading and concerns in the banking sector that followed the closure of Silicon Valley Bank in California, the shutdown of Signature Bank in New York because of its exposure to volatile cryptocurrencies, and the forced marriage of Swiss investment bank and troubled Credit Suisse.
"Closely related measures suggest that financial conditions have become tighter," Bullard said. "However, financial stress and financial conditions metrics as of today remain low compared with levels observed during the global financial crisis of 2007-2009 or during the onset of the pandemic in March-April 2020."
Banking concerns lead to heavy losses across most major market indices last month. Shares in UBS cratered by more than 11% in trading on the Swiss exchange in the few days that followed SVB's collapse.
A better look at financial health will come next week when major banks issue their earnings reports for the first quarter. JPMorgan and Wells Fargo issue their reports April 14.
Federal Reserve Chairman Jerome Powell was nonetheless deterred by banking concerns, announcing a rate hike of 25 basis points last month. Bullard said Thursday that inflation was inching lower but still was running at about three times as high as the 2% target rate for the Federal Open Market Committee.
Rate hikes from the Federal Reserve are meant to lower consumer-level inflation, though that policy may lead to job losses as higher borrowing costs create headwinds across the broader economy.
Data from both private payroll processor ADP and the federal government show hiring is starting to decline, with new job postings coming in this week at a two-year low.
On Thursday, the Commerce Department reported that first-time jobless claims numbered 228,000 during the week ending April 1, about 28,000 more than the market expected.
A report from Zacks investment services suggests the recent downturn in labor could spill over to other parts of the economy, such as manufacturing and construction.
"Weekly jobless claims almost feel like the other shoe dropping," the report read.
