From Breakingviews - Powell is leader of the free world – for now
Those banking crises threw Powell’s anti-inflation plan into disarray by adding another front to his war against the U.S. economic malaise – ensuring financial stability. That is part of the Fed’s mandate, alongside keeping inflation low and employment high, but the central bank doesn’t have to do much when banks are healthy. SVB’s failure changed that.
Backing the banks with liquidity injections increases the amount of money in circulation, pushing up inflation. That, in turn, dilutes the effect of the Fed’s drive to increase borrowing costs. Yet the recent shocks are likely to have scared banks into lending less, which would reinforce the chilling effects of monetary policy, increasing the danger the U.S. will tip into a recession this year.
, the private equity group. The circumstances have granted him tremendous powers to influence the course of the world’s biggest economy and the next presidential election but also commensurate responsibilities. His first move since the recent turmoil was a fudge – the Fed went for aHistory shows that economic conditions play an important part in how Americans vote.
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