- The Fed is facing a quadrilemma as the central bank has to grapple with inflation, recession risks, financial sector instability, and the USD’s weakening dominance in the global financial market.
- The USD’s decreasing relevancy may not be an immediate source of concern for the Fed as the use of the Yuan is still limited on payments for trade with China’s exporters.
- OPEC+ production re-introduces the fear of energy inflation in the US economy, which may encourage the Fed to refocus on its fight against inflation. However, the shifting AS curve means that the Fed may need to incur significant losses to force the CPI number back to the 2% target.
