When inflation is high, the Federal Reserve has historically raised interest rates. But in times of economic uncertainty and risky banking practices, raising rates could cause an overcorrection — and spark a recession.
When inflation is high, the Federal Reserve has historically raised interest rates. But the recent failures of banks like Silicon Valley Bank have sparked worries about the stability of our banking system.
Now the feds must weigh whether the banking system could withstand the turmoil that raising interest rates could bring. To get inside the mind of Fed chair Jerome Powell, we look to a previous era of high inflation, the late 1970s and early ‘80s, and the decisions of then Fed chairs Arthur Burns and Paul Volcker.
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