Will the Fed keep raising interest rates? : The Indicator from Planet Money Prices are rising. A major bank has collapsed. And the Fed is left holding the hose trying to put out these fires. The question of whether to raise interest rates or not just got even more challenging.

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The Fed's new dilemma: Protect banks or fight inflation?

The Fed's new dilemma: Protect banks or fight inflation?

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WASHINGTON, DC - MARCH 07: Federal Reserve Chair Jerome Powell testifies before the Senate Banking Committee March 7, 2023 in Washington, DC. Powell spoke on the state of the U.S. economy and suggested that interest rates will need to stay higher for longer than expected in order to curb inflation. (Photo by Win McNamee/Getty Images) Win McNamee/Getty Images hide caption

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Win McNamee/Getty Images

WASHINGTON, DC - MARCH 07: Federal Reserve Chair Jerome Powell testifies before the Senate Banking Committee March 7, 2023 in Washington, DC. Powell spoke on the state of the U.S. economy and suggested that interest rates will need to stay higher for longer than expected in order to curb inflation. (Photo by Win McNamee/Getty Images)

Win McNamee/Getty Images

Prices are still going up, according to the latest inflation data that dropped this morning. It's a big problem for consumers, who have to pay more for everything from cereal to rent and airfare. And it's a big problem for the Fed, as it's been raising interest rates in an effort to fight inflation.

But another huge problem has dropped into the Fed's lap: the collapse of Silicon Valley Bank. Because in addition to battling high inflation, the Fed is also in charge of keeping the country's financial system running smoothly.

As the Fed grapples with the ongoing fallout from the SVB meltdown, it could be forced into a position where it has to choose between financial stability and taming inflation. And this presents a big dilemma for the Fed: does it keep raising rates, or does it press pause?

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