Financial conditions have tightened further since January, but the US banking system remains strong and resilient, the Federal Reserve said in its semi-annual report today. Monetary Policy Report to Congress The report noted recent bank failures, which it said occurred as a result of heavy reliance on uninsured deposits, declining fair values ​​of long-duration fixed-rate assets due to rising interest rates and poor risk management practices at failed banks. . “However, the banking sector generally maintained substantial loss-absorbing capacity and ample liquidity,” the report said.

The report said growth in the first quarter of this year was modest as consumer financing conditions tightened, consumer confidence remained low and growth in real business fixed investment slowed. Activity in the housing sector continued to contract in response to high mortgage rates, but new and existing home sales have increased while home prices appear to be rising again.

Growth in banks’ total loan holdings slowed to an annualized rate of around 5% in the first quarter, down from the 9% rate in the prior quarter, reflecting higher interest rate effects. high rates, tighter credit availability and economic uncertainty, according to the report. Bank loan delinquency rates remained near record lows despite increases in consumer and real estate-backed loans. Bank profitability remained strong, although net interest margins fell due to higher financing costs. Still, the report noted that bank share prices declined as a result of market reaction to bank failures.

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