美国国家公共电台 NPR--The Fed must decide whether to press ahead with raising interest rates（在线收听）

The Fed must decide whether to press ahead with raising interest rates

Transcript

NPR's Leila Fadel talks to Peter Conti-Brown of The Wharton School about whether the Fed keeps raising interest rates. The increases so far have eased inflation, but also put stress on some banks.

LEILA FADEL, HOST:

This afternoon, the Federal Reserve will announce whether it will continue to raise interest rates. The Fed has been trying to get inflation under control without wrecking the economy. And now there's the turmoil in the U.S. banking sector, and raising interest rates could cause more instability. So what does the Fed do? To discuss that, we have Peter Conti-Brown. He's a financial historian and legal scholar who teaches at the University of Pennsylvania's Wharton School, and he joins us this morning from Ambler, Pa.

Good morning, Peter, and thanks for being on the program.

PETER CONTI-BROWN: Good morning. Glad to be here.

FADEL: So what should the Fed do? Should they raise interest rates to cool inflation or pause to help banks facing instability?

CONTI-BROWN: The Fed faces two bad options. You know, three weeks ago, they were signaling that they were eager to gallop toward breaking inflation's back with a 50-basis-point hike. And then a week and a half ago, we have a banking crisis that the Fed's actions may have exacerbated. And so now we have to understand how the two sides of the Fed's house - the crisis fighters and the inflation fighters - are going to talk to each other, if they talk to each other at all.

FADEL: Well, first, what did the Fed do to contribute to that banking crisis? And then let's get into those two sides.

CONTI-BROWN: It was a profound failure of regulation and supervision. Banks exist in a kind of public-private partnership managing risk in the financial system. The public side of that is the bank supervisors. They work for the Fed, among other agencies. But for Silicon Valley Bank, this was all the Federal Reserve. And the Fed spotted these very poor risk mismanagement practices and did not stop them. And so that's the first big problem.

The second is they rushed to declare that this was a financial crisis, like 2008, like in 2020, by invoking their emergency authorities, telling the markets, telling everyone simultaneously, hey, the crisis fighters - they're here. But also this is, in fact, a financial crisis. And this is related to the Fed's interest rate policy because this bank's - the risks they mismanaged were, in fact, that we are in an aggressive rate-hiking cycle, a cycle that the Federal Reserve on the monetary policy side has been pushing.

FADEL: What do you think of the Fed's approach to inflation so far? Has it been too aggressive?

CONTI-BROWN: The problem is that monetary policy acts on a lag. Inflation is a very serious problem. There's no doubt about it. Monetary policy is one of the policy responses. But the problem is that we've been moving so fast so far that some banks haven't been able to keep up. And so I think it's appropriate that the Fed has been raising interest rates. They've been trying to telegraph their intent loud and proud about how far they're willing to go to break inflation. What they didn't do is monitor well how that interest rate policy is destabilizing some of the least well-managed banks.

FADEL: Now, you talked about how the Fed's - are facing two bad options, but they are facing that decision today. If you were advising the Fed today, what would you tell them to do?

CONTI-BROWN: As a Fed historian, I would say if you look back at Federal Open Market Committee decisions in periods of financial distress, it's almost always been a pause or a cut. I'm not saying the Fed should cut its interest rates. We also rarely see the case where we have acute financial distress while we have growing inflation. But I would recommend a pause. It's not great.

The Fed wants to maintain its credibility as an inflation fighter, and whipsawing between 50-basis-point hikes and a pause doesn't do a lot to bolster that credibility. At the same time, we are in the midst of not knowing how bad this financial crisis could become. And every time you raise interest rates, you're creating more stress on poorly managed banks and tipping us, perhaps, into something that could truly be a systemic crisis.

FADEL: Now, you used the term crisis several times in this conversation. That's how you would describe this moment - as a financial crisis?

CONTI-BROWN: I would call it a banking crisis almost as a legal term. When the Federal Reserve and the Treasury invoked their authorities, they had to declare that it is a crisis. It's the only way they could do the big guarantees and the big provisions of liquidity that they have done. So in that sense, I'm just following the Fed's lead.

FADEL: Peter Conti-Brown of the Wharton School, thank you so much for your time.

CONTI-BROWN: I was glad to be here. Thank you.