Financial Stress May Do Relatively Little to Reduce Inflation

Brent Bundick, Johannes Matschke and Andrew Smith

Economic Bulletin, 2023, 4

Abstract: Financial stress has risen in the wake of recent bank failures. At the same time, the Federal Reserve has been tightening the stance of monetary policy to reduce elevated inflation. While both banking stress and tighter monetary policy can slow economic activity, historical evidence suggests that financial stress may be less effective in reducing inflation.

Keywords: financial stress; inflation; disinflation (search for similar items in EconPapers)
Date: 2023
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