Financial stability or fight to tame inflation? US Fed in tough spot for policy decision5 min read 22 Mar 2023, 06:05 PM IST
Seeking to achieve maximum employment and inflation of 2% over the longer run, the Fed in the previous policy hiked the key federal funds rate between 4.5% to 4.75%. This would be Fed's eighth hike.
All eyes are set on US Federal Reserve which will be presenting its monetary policy on Wednesday. A quarter-point hike is expected in this policy, however, the Fed is in a tough situation for its hawkish policy stance. The reason would be US banks' contagion risks. Fed is expected to be split between financial stability and its fight to tame inflationary pressure. Since last March, Fed has hiked its benchmark overnight interest rate by 450 basis points. And the first to show signs of a rate hike impact would be the banking sector.
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