Fiscal policy

• PHOENIX, July 20, 2023 /PRNewswire/ -- Phoenix Children's , one of the nation's fastest-growing pediatric health systems, today announced the hire of Michelle Bruhn as executive vice president and chief financial officer.
• Bruhn, who assumed her position on July 17, will oversee finance, treasury, revenue cycle and managed care contracting.
• Indeed, the health system is building new sites of service across Arizona, including Phoenix Children's — Avondale Campus , Phoenix Children's Hospital — Arrowhead Campus , Phoenix Children's Hospital — East Valley , and completing a series of expansion projects at Phoenix Children's Hospital — Thomas Campus .
• "I am honored to join Phoenix Children's at such an exciting time," said Bruhn.

• The post-COVID economic recovery and Russia’s invasion of Ukraine caused inflation to reach 10% or more in many countries.
• Central banks in the US, UK and Europe have fought back by raising interest rates in an attempt to cool the economy and return inflation to their 2% targets.
• Central banks are expected to continue to raise rates while, in the UK, the government is simply looking on.
• But he has been clear that the government will not intervene by stopping rate hikes or directly subsidising homeowners’ mortgages.

Can rate rises slay inflation?

• Hunt has said the Bank of England’s rate rises have his “full support” as “one of the most effective methods of bringing inflation down”.
• It is true that rate rises can cool inflation by cooling the economy.
• By raising the repayment costs of mortgages and other sorts of loan, consumers, business and even the government are left with less money to spend.

How to avoid financial instability

• “It would reduce the need for monetary policy to keep interest rates higher for longer, thereby reducing the risk of financial instability,” stated its 2023 report on the global economy, published June 25.
• Likewise, the deputy head of the International Monetary Fund told the Financial Times on June 26 that central banks had to face the “uncomfortable truth” that they might have to tolerate periods of above-2% inflation to avoid their interest rate rises triggering further financial instability.
• I pointed out that rapid rises in interest rates to deal with inflation would cause a financial crisis in the shadow banking sector, which includes financial firms that don’t come under the stricter regulations of the mainstream banking sector.

Fiscal policy to the rescue?

• As a Conservative, she has a strong political aversion to raising direct taxes that might impact wealthy voters.
• The appointment of Hunt as chancellor and then Rishi Sunak as prime minister following the ill-fated mini-budget resulted in most of its measures being reversed.
• If fiscal and tax policy had been used to reinforce the 2% target last year, a wage-price spiral might have been avoided.
• But without more determined action by the government, the odds of Sunak’s gamble working out for him – and for UK mortgage borrowers – look ever longer.

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• 1 March 2023
  The interview is an updated version of the conversation broadcast in the IMF podcast series on 17 November 2022.
• After rising to highs not seen for 40 years, inflation in Europe is showing signs of slowing.
• How important is it to the euro area’s economic outlook that the authorities succeed in returning inflation expectations to 2 percent?
• If the public comes to believe that inflation will remain high on an indefinite basis, this would be baked into price and wage setting and become self-sustaining.
• So it is essential that monetary policy is clearly set to make sure that inflation returns in a timely manner to our 2 percent target.
• This has been especially important over the last year, given that monetary policy had been previously geared for several years to address a persistent below-target inflation pattern.
• This episode will no doubt be studied for many years to come, so my answer to this question is highly provisional.
• We will also learn a lot about the conduct of monetary policy and the effectiveness of monetary policy over the coming months.