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The Federal Reserve had a tricky job balancing its fight against runaway inflation with the potential for a full-blown banking crisis if it were to make the wrong move yesterday. The middle ground where it landed was an as-expected quarter-point increase in borrowing rates, which nodded to banking sector fragility without letting up entirely on inflation.
The economists and financial experts we asked to react to the decision pretty much agreed: That was a good call.
“The Fed decided, with so much uncertainty about the impact the recent turmoil will have on the economy, the risk of causing more damage was greater than the risk of inflation,” write economists Joerg Bibow and Marketa Wolfe. “It was able to do this in large part because there are clear signs inflation has come down.”
At the same time, by continuing to raise rates, the Fed signaled that “the inflation battle must go on,” argues Jeffery S. Bredthauer, a finance expert at the University of Nebraska Omaha. And this “shows that it has confidence in the banking system.”
But perhaps the fight is nearing its end. Arabinda Basistha, an economist at West Virginia University, explains why he expects a pause in interest rates as early as this fall.
Also today:
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Fed chair Jerome Powell opted for a cautious approach on rates.
Alex Wong/Getty Images
Jeffery S. Bredthauer, University of Nebraska Omaha; Arabinda Basistha, West Virginia University; Joerg Bibow, Skidmore College; Marketa Wolfe, Skidmore College
The Fed raised rates by a quarter-point – less aggressive than had been expected before the current banking crisis, but signaling inflation is still its focus.
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Science + Technology
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Doug Jacobson, Iowa State University
Banning TikTok: What data privacy risk does the app pose, and what could the Chinese government do with data it collects? And is it even possible to ban an app?
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Allison Christy, Boise State University; Scott Phillips, Boise State University
Researchers have developed a method for producing strong plastic materials by tweaking the chemical structure of superglue.
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Ethics + Religion
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Kevin C. Taylor, University of Memphis
Mindfulness is everywhere in pop culture today, but that doesn’t mean people agree on what it means.
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Health + Medicine
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Jessica A. Marino, University of California, Merced; Jennifer Hahn-Holbrook, University of California, Merced
Many families in the US encountered empty shelves when they went in search of infant formula during COVID-19.
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Arts + Culture
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Robert Samuels, University of California, Santa Barbara
Do the show’s fans secretly identify with the characters’ pursuit of power and pleasure?
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Economy + Business
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Brian Mittendorf, The Ohio State University
The National Rifle Association is spending heavily on legal fees and slashing programs for its members.
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Politics + Society
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Ronald Suny, University of Michigan
The setting was grand, so too was the plan. But behind the peace plan put forward by China and welcomed by Russia, is the question, what do both nations seek?
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Sarah Burns, Rochester Institute of Technology
The House of Representatives is breaking norms and establishing a new way for the body to do business.
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Environment + Energy
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Miguel Jimenez, Colorado State University
Machine learning may not seem to have much connection with wildlife, but it’s starting to play a central role in bird conservation.
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