PARSING POWELL — Federal Reserve Chair Jerome Powell — recently tossed into the worst banking crisis since 2008 — kept his highly anticipated press conference today unusually brief. The Fed’s policy statement, which announced another quarter-point bump in interest rates, was equally terse. But both contained some enormously important words, even if Powell himself had to guide reporters on which specific ones they should focus on. He carefully and cautiously explained what the Fed meant by this new phrase: “The Committee anticipates that some additional policy firming may be appropriate.” But let’s come back to this bit. It’s super important. But it’s also secondary to the biggest thing Powell did. And that was to, in the broadest sense, fully nationalize and backstop the entire United States banking system in the wake of the collapse and federal rescue of Silicon Valley Bank and Signature Bank. Many in the financial world assumed that actions taken by the government on March 12 — in which the FDIC instantly guaranteed all the banks’ depositors, even those above the insured threshold of $250,000, would not lose a cent — would telegraph that the government would not allow depositors at any FDIC institution to lose money. But that did not quite do the trick with similar mid-size banks with lots of $250,000-plus accounts — such as San Francisco-based First Republic — getting clobbered. Since the initial rescue announcement, both President Joe Biden and Treasury Secretary Janet Yellen have tried to hammer home the message that what the Fed, Treasury and FDIC did means that no depositors are at risk. And they did it without coming out and saying that all deposits are now insured, something that only an act of Congress could officially do. Today, Powell took his shot, asserting that the actions mean “all depositors’ savings in the banking system are safe.” Then under reporter questioning, Powell had to slip into word-parsing mode. A reporter for The Economist asked if Powell was “de facto saying” all savings are now insured. But Powell would not take the bait. “I’m not saying anything more than what I’m saying,” Powell said. “Depositors should assume that their deposits are safe.” Theoretically this should put to rest fears of a rolling, full-blown banking crisis. But it doesn’t tell us much about where the U.S. economy itself is headed. Fierce debate raged ahead of this week’s Fed meeting about whether the central bank would keep boosting rates to fight still-too-high inflation, or take a pause or even stop entirely in part because the fallout from SVB and Signature is already slowing the economy (essentially doing the Fed’s work for it). In the end, as certain journalists predicted, the Fed went for a quarter-point hike but eased up its language to telegraph to Wall Street that the end of hikes may be near. Instead of mentioning “ongoing” additional hikes, the statement referred to “some additional policy firming may be appropriate.” Asked what the difference was between “ongoing rate increases” and the Fed’s new language, Powell said: “It’s meant to refer to our policy rate. I would focus on the words, may and some, as opposed to ongoing.” This likely means that there “may” be another rate hike or two. Or there may not be, depending on conditions. But if there are hikes, there won’t be many. Just “some.” Markets slipped a bit on the day, but basically accepted Powell’s tightrope performance. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at bwhite@politico.com or on Twitter at @morningmoneyben.
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