Niel Kashkari, the President of the Federal Reserve, announced today to CBS Network that the recent pressures faced by the banking sector and the potential for a subsequent credit crisis are bringing the United States closer to recession.
Kashkari stated, "This certainly brings us closer. The unclear aspect for us is how much these banking pressures will lead to a widespread credit crisis." He added, "This crisis would then slow down economic activity. This is something we are closely monitoring."
Kashkari noted, "The pressures started just two weeks ago. There are some concerning indicators. On the positive side, it seems that the outflow of deposits has slowed down, and smaller and regional banks have begun to regain some confidence." He continued, "At the same time, we've seen many money markets close over the past two weeks. If money markets continue to close due to concerns of borrowers and lenders, it would indicate a likelihood of a greater impact on the economy. Therefore, it's too early to make any predictions regarding the upcoming meeting of the Federal Open Market Committee."
