Powell: Banking System Strong, Cyber Risk Remains a Threat

Federal Reserve Chairman Jerome Powell told members of the Senate Banking Committee today that “the banking system is strong,” and that while “there are some issues to address in the capital markets, I wouldn’t say they rise to the level of grave systemic importance.” He did flag cyber risk as a key threat to financial stability.

“We always think about cyber risk as being the one that’s so difficult to quantify and for which it’s hard to have a great playbook, so that’s the one I tend to lose sleep over,” Powell said.

Turning to the state of the economy, Powell acknowledged that “the threat of persistently higher inflation has grown,” due particularly to unanticipated supply chain issues, but that “my baseline expectation is still . . . that inflation will move back down over the course of the next year.” He told lawmakers that the Fed would continue to “use our tools to make sure that higher inflation does not become entrenched.”

Powell added that the Federal Open Markets Committee will discuss at its upcoming meeting the possibility of tapering asset purchases on an accelerated timeline, noting that the committee will carefully review incoming information on the labor market and the new omicron variant of the coronavirus.

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