‘No Painless Option’: Fed Faces Tough Choice on Inflation Following Bank Collapses

The U.S. Federal Reserve may be less likely to use its key tool to combat inflation because of recent bank failures. The Fed has been aggressively hiking interest rates for months to help combat inflation. While inflation has slowed, it remains elevated. Given the recent bank collapses, hiking rates again may be too risky for the Fed. “The Federal Reserve is going to have to pick its poison – tolerate some inflation for a bit to see if its current series of rate hikes takes hold and pause or keep hiking and deal with the financial instability caused by their own policy decisions,” Jamie Cox, managing partner for Harris Financial Group in Virginia, said in a statement.