Fed boosts focus on liquidity, other risks as economy weakens: Barr

Nov 14 (Reuters) – Michael Barr, the Federal Reserve’s prime regulatory official, stated Monday the U.S. central financial institution is anticipating any stresses to the monetary system amid a weakening economic system, and signaled that stiffer oversight of cryptocurrency is within the offing.

The Fed “might be heightening its give attention to liquidity, credit score, and interest-rate dangers as supervised establishments handle the altering monetary circumstances,” Barr stated in written testimony ready for supply Tuesday to the Senate Banking committee, noting that the U.S. financial outlook has weakened “amid tighter monetary circumstances and elevated uncertainty.”

“A weaker economic system may put stress on households and companies and, thus, on the banking system as an entire,” he stated, noting that inflation is way too excessive, and geopolitical occasions like Russia’s conflict in Ukraine pose draw back dangers to the U.S. and world economies.

Barr’s feedback come because the Fed tightens financial coverage extra aggressively than it has in 40 years because it battles too-high inflation by making an attempt to sluggish the economic system and take the warmth out of labor markets.

Final week Fed policymakers unanimously determined to boost their benchmark fee by 75 foundation factors to a variety of three.75%-4%.

Barr used his speech to put out a set of priorities for regulation that features financial institution capital necessities, financial institution mergers, and cryptocurrencies.

“We don’t need to stifle innovation, however when regulation is lax or behind the curve, it will possibly facilitate threat taking and a race to the underside that places shoppers, companies, and the economic system in peril and discredits new services and products with shoppers and traders,” Barr stated.

Current occasions in crypto markets, he added, “whereas principally occurring outdoors the banking sector, have highlighted the dangers to traders and shoppers related to new and novel asset lessons and actions when not accompanied by robust guardrails.”

Crypto alternate FTX collapsed final week, sending shock waves by means of the business and prompting requires stiffer regulatory oversight.

Reporting Ann Saphir and Lindsay Dunsmuir; Modifying by Leslie Adler and Cynthia Osterman

Our Requirements: The Thomson Reuters Belief Ideas.