Banking stress brings U.S. to brink of recession

 

The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, says recent bank turmoil increases the risk of a U.S. recession.   However, it is too soon to determine the full impact on the economy and monetary policy. Uncertainty exists regarding whether banking stresses will lead to a credit crunch and slow the economy. Kashkari's remarks are more guarded than other Fed officials prioritizing inflation and policy tightening. Last week, the Fed increased the benchmark rate by a quarter point, from 4.75% to 5%. A shutdown of capital markets could cause more economic pain if it persists. The transcript of the interview with Kashkari that aired on "Face the Nation" on Sunday, March 26, is available here.  Zoom Out: Kashkari previously advocated for higher interest rates to combat inflation but suggests that the current banking sector turmoil may provide a solution.