The Federal Reserve’s dilemma over whether to press ahead with its campaign of raising interest rates after bank failures has been further complicated by the release of strong inflation data.
Officials of the US central bank are set to gather next week for a two-day policy meeting at which they will decide how substantially to alter their plans for monetary tightening in light of the turmoil in the banking system triggered by last week’s implosion of Silicon Valley Bank, which was followed by that of Signature Bank.
But following the release of data on Tuesday showing a 0.5 per cent rise in “core” consumer price growth in February despite a slower annual pace, the Fed must now thread a delicate needle of continuing to root out persistent inflation while also ensuring the smooth functioning of the financial system.