(Bloomberg) -- Federal Reserve Bank of St. Louis Fed President James Bullard said financial stress has increased in recent weeks due to the banking crisis but can be contained with regulatory policies rather than interest rates. 

“In my view, continued appropriate macroprudential policy can contain financial stress in the current environment, while appropriate monetary policy can continue to put downward pressure on inflation,” Bullard said in an essay posted Tuesday on his bank’s website. 

“Financial stress has been on the rise since then in the wake of recent bank failures and turmoil,” he wrote. “The macroprudential policy response to these events has been swift and appropriate. Regulatory authorities have used some of the tools that were developed or first utilized in response to the 2007-09 financial crisis in order to limit the damage to the macroeconomy, and they’re ready to take additional action if necessary.”

Bullard has sought to separate the responses to financial stability concerns and inflation. Fed officials raised interest rates by a quarter percentage point last week, continuing their year-long fight to cool price pressures despite recent turmoil in the banking system. 

The move lifted their policy benchmark to a 4.75% to 5% target range, from near zero in March 2022. 

Forecasts released at the same time show the 18 officials expect rates to reach 5.1% by the end of the year, according to their median projection, implying one more 25 basis-point hike. Bullard last week said he had revised his own forecast 25 basis points higher to 5.625% due to ongoing economic strength.

Economic data through February showed the labor market in robust shape with low unemployment of 3.6%, while consumer spending has been resilient. But the collapse earlier this month of Silicon Valley Bank could potentially hit the real economy by crimping the availability of credit, which policymakers say they will watch closely.

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