Federal Reserve Chair Jerome Powell on Wednesday called the U.S. banking system "strong and resilient," voicing confidence in the nation's financial system and the safety of bank deposits less than two weeks after the failure of Silicon Valley Bank, the second-biggest bank collapse in U.S. history.
"All depositors' savings in the banking system are safe," Powell added in remarks made at a press conference in Washington, D.C.
While characterizing recent financial problems as limited to a small part of the banking sector, Powell defended the swift and extraordinary actions undertaken by the Fed and other federal agencies to protect the financial system.
"In the past two weeks serious difficulties at a small number of banks have emerged," Powell said. "History has shown that isolated banking problems, if left unaddressed, can undermine confidence in healthy banks and threaten the ability of the banking system as a whole to play its vital role in supporting the savings and credit needs of households and businesses."
The remarks from Powell came minutes after the Fed announced a 0.25% increase of its benchmark interest rate, intensifying the central bank's fight against inflation despite concern that previous rate increases helped trigger the nation's banking crisis.
Inflation has fallen significantly from a summer peak, though it remains more than triple the Fed's target of 2%.
"Inflation remains too high," Powell said. "We remain strongly committed to bringing inflation back down to our 2% goal."
The rapid rise in interest rates, however, tanked the value of bonds held by Silicon Valley Bank, precipitating its failure and cascading damage for the financial sector, including the collapse of New York-based Signature Bank.
Fearing wider spread of the crisis, the Federal Deposit Insurance Corporation, the Treasury Department and the Fed took a major step, telling depositors in Silicon Valley Bank and Signature Bank that the FDIC would protect all of their funds, including those that exceed the $250,000 limit.
Some members of Congress have criticized Powell for allegedly lax bank oversight at the Federal Reserve, as well as an aggressive series of interest rate hikes, which they say led to the collapse of Silicon Valley Bank.
On Wednesday, Sen. Elizabeth Warren, D-Mass., and Sen. Rick Scott, R-Fla., proposed legislation that would establish an independent inspector general to oversee the Federal Reserve.
Speaking on Wednesday, Powell said the Federal Reserve is watching developments in the financial sector and remains open to taking further action.
"We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound," Powell said.
He went on, "We’re committed to learning the lessons from this episode and to work to prevent events like this from happening again."