America’s currency watchdogs are faced with a dilemma: If they raise interest rates, they will continue to stress the banking sector. If they don’t, the situation is even worse than feared. How Fed Chair Powell should proceed.
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Markus Zydra, Frankfurt
The US economy is growing, the unemployment rate is low and inflation, at six percent, is far too high. There really aren’t any better arguments for another rate hike. And yet the US Federal Reserve has good reasons this Wednesday not to follow those arguments. After the bank failures in the USA and the drama surrounding Credit Suisse, fears of an international banking crisis are rampant on the financial markets. This poses a dilemma for America’s currency watchdogs: If you continue to raise the key interest rate, you will stress the banking sector even more. Do you really want that?