In a press briefing following Wednesday Federal Open Market Committee meeting, Powell said that while the recent failings of Silicon Valley Bank and Signature Bank did not deter a 10th consecutive rate hike, it has given the committee some pause about how it will approach future increases.

Powell said the recent bank system failures are likely to result in a level of credit tightening that would have a similar effect on the economy as an interest rate hike.

“It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy shall respond,” Powell said. “As a result, we no longer state that we anticipate ongoing rate increases will be appropriate to quell inflation. Instead, we now anticipate that some additional policy firming may be appropriate.”

The chairman clarified that “policy firming” may come in the form of rate hikes, but if there is a “significant tightening of credit conditions” the Federal Reserve’s rate increases may not be necessary at the frequency they have taken place over the last year.

Before SVB fell into calamity, Powell said the committee appeared on track to continue as planned with ongoing rate hikes based on strong economic reports in the first quarter.

If in the coming months the economy holds to the FOMC’s summary of economic projections, there will be no interest rate cuts coming in 2023, according to Powell.

The central bank has made nine-straight rate increases in response to rampant inflation prior to today, which some say has led to the emerging crisis in the banking sector.

The Fed now faces the tough challenge of easing market fears to prevent a run on the banks while also keeping inflation and other factors in check to avoid sending the country into recession.

“The broader macro data shows some further tightening is warranted,” said Michael Gapen, chief U.S. economist at Bank of America.

But another rate hike was likely to further saddle medium-sized banks across the nation while stifling lending to small businesses and other worthy borrowers.

Several Democrats on Capitol Hill have criticized the rate hikes as “reckless” while imploring Powell to hold off on more increases to avoid exacerbating the banking issue.

“On his watch, we have seen a series of bank failures, deregulatory measures, and reckless interest rate hikes that have all threatened to undermine our economic recovery and make our financial system less safe,” Rep. Ayanna Pressley, of Massachusetts, told Politico. “He has so far refused to pause interest rate hikes despite the risk of millions of job losses and the disparate impact they would have on our most vulnerable.”

Meanwhile, investors were still bristling over the bank collapses but were also eager to hear how the Fed planned to get the situation under control while some feared another bump in interest rates would likely ensnare other banks.

“We want to know it’s really about a few idiosyncratic institutions and not a more pervasive problem with respect to the regional bank model,” Gapen explained. “In these moments, the market needs to know you feel you understand the problem and that you’re willing and capable of doing something about it. … I think they are exceptionally good at understanding where the pressure is that’s driving it and how to respond.”

This week, Treasury Secretary Janet Yellen continued to express confidence in the nation’s banking system, echoing testimony she gave last week before the Senate Finance Committee that reassured depositors their money would be safe following the collapse of Silicon Valley Bank and Signature Bank.

To stem the fallout, federal regulators have taken several steps to guarantee deposits and shore up other small banks.

“The situation demanded a swift response,” Yellen said of the bank failures and the Federal Deposit Insurance Corporation stepping in to guarantee all depositors regardless of amount. “In the days that followed, the federal government delivered just that: decisive and forceful actions to strengthen public confidence in the U.S. banking system and protect the American economy.

“Let me be clear: The government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe,” Yellen said.

On Sunday, the Fed partnered with several world central banks — including Bank of Canada, Bank of England, European Central Bank, Bank of Japan, and Swiss National Bank — to help shore up the global financial system in hopes of preventing further liquidity after UBS agreed to buy Credit Suisse for $3.2 billion

Wednesday’s action by the Fed comes a month after Commerce Department data revealed personal consumption expenditures — a key inflation indicator for the Fed — rose 5.2% in January from a year earlier, indicating continued concern over rising prices.