The US Federal Reserve is struggling to keep its course – concerns about financial stability are growing

Federal Reserve in Washington, DC

The US Federal Reserve has declared war on inflation with another rate hike.

(Photo: Reuters)

Denver At the end of August, Jerome Powell’s message was simple and unmistakable: Interest rates will continue to rise significantly, emphasized the head of the US Federal Reserve (Fed) at the major central banker meeting in Jackson Hole. “We will stay tuned until inflation moderates.”

Powell has since repeated this phrase frequently. Among monetary observers, it is also seen as a covert salute to former Fed Chair Paul Volcker, who made history for his adamant rate hikes in the 1980s. His autobiography, published in 2018, is titled Keeping at it.

Now, however, the Fed is at a difficult juncture. It has raised key interest rates in big steps to a range of 3 to 3.25 percent. A further increase of 0.75 percentage points is considered agreed at their next meeting on Wednesday. However, the question arises as to how much longer Powell’s “hanging on” is justified.

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