Fed Weighs Stubborn Inflation Against Banking System Stress

At its March meeting, the Federal Reserve hiked its policy rate by 25 basis points (bps) while signalling a more cautious outlook as officials grapple with recent banking sector stress amid still elevated inflation. Indeed, the Fed statement admitted that “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.” Fed officials also signalled that they could possibly be on hold after this hike, stating that some additional policy firming “may” be appropriate, instead of “will” be appropriate...