In today’s briefing:
- Fed’s Inflation Fight: Upended by Banking System Concerns?
Fed’s Inflation Fight: Upended by Banking System Concerns?
- Potential fragility in the US banking system raises the ante on the Fed to pause increasing its policy rate. Easy money impaired banks’ ability to endure higher funding costs.
- Newly available access to the Fed’s balance sheet incurs consequences, including moral hazard, less competition and potentially easier financial conditions when inflation remains elevated.
- Markets are discounting that the Fed will ease policy settings to counter banking system events. The Fed faces difficult challenges in trying to quell inflation and preserve financial stability.
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