Bank failures could change policy decisions around inflation

CEDAR RAPIDS, Iowa (KCRG) - A new consumer price index report shows inflation dropped in the United States for the 8th straight month. But, one expert TV9 spoke with said the failure of Silicon Valley Bank and Signature Bank will make it more difficult for the Federal Reserve to decrease inflation while increasing interest rates.

According to the United States Bureau of Labor Statistics, the consumer price index increased by 6% from February 2022 to February 2023, which is smaller than it was in January at 6.4%. Food prices over the 12-month period are up 9.5%, while energy costs are up 5.2%.

Niki Klein, who said she is the manager for Midtown Family Restaurant in Iowa City, said she’s seen a small decrease in prices lately. However, she said she’s still seeing higher overall prices and dealt with shortages of different products.

”We’ve gotten out of many things,” Klein said. “We can’t carry certain things on our menu anymore. It’s unavailable or it’s too expensive so that’s been frustrating.”

Anne Villamill, who is a University of Iowa Professor, said has studied monetary policy for around 35 years. She said the federal reserve increases interest rates to lower inflation, however the higher interest rates indirectly led to the collapse of a bank. She said this means the federal reserve will have to find a balance between fighting inflation and not putting too much pressure on banks assets.

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