Jason Furman: It’s not the Fed’s job ‘to rescue the financial system by cutting interest rates’

Jason Furman, the former Chair of the White House Council of Economic Advisors under President Obama, joins Andrea Mitchell to offer his insights on the Federal Reserve’s consideration of raising interest rates to combat inflation as the banking system continues to recover from a recent series of bank failures. “Demand is still too high. Inflation is too high. But a lot of banks are in the process of cutting back their lending right now. And so that means the Fed may not need to raise rates as much as it had expected, because banks are going to do a lot of the job on their own,” Furman says. “That being said, I do think the Fed needs to make it clear that their job is not to rescue the financial system by cutting interest rates. Their job is to set interest rates in order to control inflation. And then they have other tools, tools like lending facilities if the financial system needs liquidity assistance.”March 22, 2023