- There's no clear signs of a US credit crunch yet, according to Fed official John Williams.
- We haven't seen any clear signs yet of credit conditions tightening and we don't know how big those effects will be," he said.
There's no clear sign of a credit crunch in the US yet, the president of the New York Federal Reserve has said — even as his own bank's survey found Americans are already feeling the squeeze.
The turmoil in the US banking sector could mean it becomes more harder for households and businesses to secure loans, Fed Chair Jerome Powell and others have warned. That because lenders are likely to toughen the requirements for getting a line of credit.
"You've seen that in the past, where credit conditions may tighten somewhat," John Williams said about the fallout from financial sector stress, per Bloomberg.
"We don't really know whether this will happen this time. We haven't seen any clear signs yet of credit conditions tightening and we don't know how big those effects will be," he added at a New York University event Monday.
A squeeze on credit would likely have an impact on spending and in turn, on employment as less money flows through the economy.
A growing number of US households feel like their access to credit has deteriorated, according to the New York Fed's own consumer expectations survey. The number of people saying so reached a new high, with the percentage finding it harder to get credit at its highest since 2014.
Credit crunch fears kicked off after Silicon Valley Bank and Signature Bank collapsed in March. The bank failures prompted worries that smaller and regional US banks could come under pressure.
Worries about the stability and deposit insurance at smaller lenders drove a surge of customers seeking to move their money to money-market funds and larger banks, seen as a safer. Top investors like Bill Ackman and Jim Bianco have warned the surge in outflows could ultimately lead to a credit crunch.
Other commentators have blamed the Fed's aggressive interest rate hikes as a key factor in the collapse of SVB and Signature Bank. SVB's crisis kicked off when it revealed $1.8 billion in losses from a fire sale of its bond portfolio, which took a hit in value as rates rose.
But Williams — who is vice-chair of the Fed's rate-setting committee — played down the role of Fed policy in setting the stage for the bank failures.
"I personally don't think the pace of rate increases was behind the issues at the two banks back in March," he said at the Economics Review event.
"I think it's well understood there were some pretty idiosyncratic specific issues with those institutions."