The Federal Reserve must choose between inflation and market chaos

“Our policy actions work through financial conditions.” So said Jerome Powell, chairman of the Federal Reserve, late last year, referring to the causal chain of monetary policy. As interest rates rise, tighter financial conditions lead companies and consumers to cut spending, prompting economic slowdown and lower inflation. The past ten days have illustrated a less desirable causal chain: from higher rates to a .These stormy financial conditions pose a dilemma for the Fed. Should it remain focused on high inflation, and thus continue to raise rates? Or is now the priority?