Less than two weeks after the second-biggest bank failure in U.S. history, Federal Reserve Chair Jerome Powell made clear that inflation remains policymakers’ top concern.
The Fed chief advised that more Fed tightening may be in store after Wednesday’s interest-rate hike, and that the central bank will raise rates higher than expected if needed. In a news briefing, he also said officials don’t expect to be cutting rates this year — even as the bond market showed traders doubling down on that outcome.
Officials are making a calculated risk that, while the recent banking turmoil will likely slow the economy, it won’t mushroom into a broader financial meltdown. While their predecessors got a similar calculation wrong in 2007, regulators are counting on higher capital and liquidity standards, and a more muscular response, to ring-fence problems today.
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