The Federal Reserve Must Choose Its Poison
==========
The Federal Reserve's ultra-easy monetary policy has created both an inflation and a financial stability problem. The Fed now faces the dilemma of choosing between keeping interest rates high to meet its inflation target but risking financial stability, or cutting interest rates to stabilize the financial system but jeopardizing its inflation goal. The Fed's loose monetary policy in response to the 2020 recession led to high inflation and a commercial real estate bubble. Although inflation has been brought down to around three percent, the Fed recognizes that it is too early to declare victory and expects to keep interest rates high until at least the second half of the year. The commercial property sector is experiencing a slow-motion train wreck, with office vacancy rates increasing and property developers facing the challenge of rolling over $930 billion in maturing debt at higher interest rates. This could lead to a wave of commercial property defaults and potentially trigger a regional bank crisis. The Fed's monetary policy mistakes have resulted in a heavy economic price, forcing it to choose between price stability and financial stability.
#FederalReserve #MonetaryPolicy #Inflation #FinancialStability #InterestRates #CommercialProperty
https://www.aei.org/economics/the-federal-reserve-must-choose-its-poison/
American Enterprise Institute /
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2024-04-09 16:28:37
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2024-04-09 16:28:37Event JSON
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"content": "The Federal Reserve Must Choose Its Poison\n==========\n\nThe Federal Reserve's ultra-easy monetary policy has created both an inflation and a financial stability problem. The Fed now faces the dilemma of choosing between keeping interest rates high to meet its inflation target but risking financial stability, or cutting interest rates to stabilize the financial system but jeopardizing its inflation goal. The Fed's loose monetary policy in response to the 2020 recession led to high inflation and a commercial real estate bubble. Although inflation has been brought down to around three percent, the Fed recognizes that it is too early to declare victory and expects to keep interest rates high until at least the second half of the year. The commercial property sector is experiencing a slow-motion train wreck, with office vacancy rates increasing and property developers facing the challenge of rolling over $930 billion in maturing debt at higher interest rates. This could lead to a wave of commercial property defaults and potentially trigger a regional bank crisis. The Fed's monetary policy mistakes have resulted in a heavy economic price, forcing it to choose between price stability and financial stability.\n\n#FederalReserve #MonetaryPolicy #Inflation #FinancialStability #InterestRates #CommercialProperty\n\nhttps://www.aei.org/economics/the-federal-reserve-must-choose-its-poison/",
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