STORY: Amid recent turmoil in financial markets spurred by the collapse of two U.S. banks, Federal Reserve Chair Jerome Powell Wednesday announced an interest rate hike of a quarter of a percentage point—and indicated the fed was on the verge of pausing further increases – as Powell warned that stress in the banking industry could trigger a broad credit crunch with "significant" implications for the U.S. economy.“We believe, however, that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond. As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation. Instead, we now anticipate that some additional policy firming may be appropriate.”The Fed's relentless rate hikes to rein in inflation are among factors blamed for the biggest banking sector meltdown since the 2008 financial crisis. Policymakers have stressed the turmoil is different from the crisis 15 years ago, saying banks are better capitalized and funds more easily available.Powell insisted the system was sound after the spate of actions that the central bank and other regulators have taken in the last two weeks."These actions demonstrate that all depositors' savings in the banking system are safe," “We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound."But while deposits might be safe.. the recent banking dysfunction could hurt consumers in other ways—as banks pull back-loans might be harder to come by.Christian Ledoux is a director at CAPTRUST. “The banking situation is actually disinflationary, as banks are going to be responding to this by loading less and being a little bit more conservative.”That could help the fed back off its inflation fight.This is quite a shift from a few weeks ago when a series of stronger than expected economic reports had raised concerns the Fed would continue lifting rates longer than anticipated and to a higher level.