Quick Edit: Rock and Hard Places

As the US Federal Reserve prepares to announce its monetary policy on Wednesday, it appears its battle against inflation has grown concerned that it may go on too long. Earlier, billionaire Elon Musk warned of a “severe recession” if interest rates rise further. His tweet on this was in response to a tweet by former Treasury Secretary Lawrence Summers, who also spoke of setting a recession if the Fed continues its current stance. path. Monetary policy operates with a lag, and recent US bank failures have raised concerns over a worsening of tight money. “It’s not just the canary that died in the coal mine (SVB), one of the hardcore miners (Credit Suisse) also died and the cemetery is filling up fast!” Musk tweeted. However, the Fed has prioritized reducing inflation and may choose to raise its policy rate by another quarter-percentage-point. While US price growth eased from a four-decade high of 9.1% last June to 5% in March, inflation remains well above its 2% target. The Fed may not want to lay down its hand until it is sure the job is done, a call complicated by strange signals from the US job market. With financial stability on a knife’s edge, as some fear, it’s between a rock and a hard place.