Greenspan’s real conundrum

What is a central bank to do if its interest rates are too low to contain inflation but high enough to threaten an over-indebted financial system? The Federal Reserve’s response is to keep raising its official target for short-term interest rates but meddle with the actual market rate when financial conditions get hairy. Look what it has done over the past few weeks. On May 3 it raised its target rate to 3% from 2.75% and hinted further increases were likely. Yet on April 28 it allowed banks to ...