The credit crunch caused by today’s banking stress is likely to create a harder landing for the real economy, according to New York University's Professor Emeritus of Economics Nouriel Roubini, a.k.a 'Dr. Doom'.
In an interview with Yahoo Finance's Rachelle Akuffo, Roubini said, "Even before this banking stresses, the FED was facing a dilemma," referring to its goal of achieving price stability while maintaining growth –– which Roubini notes would be difficult to accomplish through interest-rate hikes due to the risk of a hard landing. Roubini went on to say, "The dilemma has become a trilemma"
"In addition to price stability and maintaining growth, we also need financial stability, and as you raise rates, you create more stresses for both creditors and for borrowers," said Roubini, "therefore you have only one policy instrument. In this case, the FED funds rate to hit three targets: price stability, growth and financial stability. To me, that looks like mission impossible."
Key video moments:
00:00:04 The Federal Reserve's dilemma
00:00:16 The Federal Reserve's 'trilemma'
