The Fed's new dilemma: Protect banks or fight inflation?

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 14 March 2023

⏱️ 10 minutes

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Summary

Prices are rising. A major bank has collapsed. And the Fed is left holding the hose trying to put out these fires. The question of whether to raise interest rates or not just got even more challenging.

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Transcript

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0:00.0	NPR.
0:12.0	This is the Indicator from Planet Money.
0:13.6	I'm Darien Woods.
0:14.7	I'm Whalen Wong.
0:16.3	And this morning over our morning coffee, we all had to digest some bad news on inflation.
0:22.6	The numbers are out for February and the Consumer Price Index was up 6% from a year ago.
0:28.6	Yeah, the prices keep rising.
0:30.3	So yeah, that coffee, that orange juice, that croissant, all likely more expensive.
0:35.9	It's not great.
0:37.0	I mean, this path down to low inflation is taking longer than a lot of people would have hoped.
0:43.2	And for a while, it looked like, okay, this is the Fed's big job.
0:46.5	They're just trying to get inflation down.
0:48.7	But then there's huge other thing happened in the middle of all of this.
0:53.3	You might have heard of it.
0:54.2	Silicon Valley Bank, the country's 16th largest bank, just went kaput last week.
0:59.1	And this is a really big job for the Fed too, because the Fed is in charge of making sure
1:04.0	the banking system is healthy.
1:06.2	And so there is this huge dilemma on the Fed's hands.
1:10.2	Does it keep raising interest rates and really bring down inflation?
1:14.0	Or does it take a pause?
1:15.2	Take a breather and make sure that the financial system, which by the way is its other goal,
1:20.9	make sure that the financial system is safe.
	...

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