GEOFF BENNETT: Good evening and welcome to the "NewsHour."
The Federal Reserve has raised interest rates again by another quarter of a percentage point.
Today's decision came against the backdrop of troubles in the banking industry.
AMNA NAWAZ: The rate hikes are being blamed by some for weakening banks.
But Fed policymakers stuck to their stance that higher rates are essential for the moment to try bringing inflation under control.
After announcing the Fed's ninth rate hike, Chairman Jay Powell suggested the agency might slow or pause any future increases.
JEROME POWELL, Federal Reserve Chairman: We believe that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes.
It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond.
AMNA NAWAZ: The Fed has been doing its share of damage control and emergency assistance for nearly two weeks in the wake of the second largest bank failure in U.S. history, the collapse of Silicon Valley Bank, followed by Signature Bank.
That sparked broader concern about the stability of America's small and midsized banks, like First Republic, where an exodus of customers fled to larger banks.
Even before the bank failures, some economists and policymakers had been encouraging the Fed to stop interest rate hikes over fears of a recession.
The Fed is also weighing whether additional rate hikes could destabilize other parts of the economy.
At the same time, job growth remains strong and steady, with more than 300,000 new jobs created in February.
Powell is facing fire from Republicans and Democrats on a number of fronts, including banking oversight, as it conducts its own review of the Silicon Valley Bank failure.
Senators Rick Scott and Elizabeth Warren introduced a bipartisan bill that would replace the Fed's internal watchdog with an independent one appointed by the president.
Warren called out the Fed on ABC's "This Week" on Sunday.
SEN. ELIZABETH WARREN (D-MA): I'm calling for an independent investigation of the Fed and the whole regulatory system here.
The Fed doesn't just get to do its own investigation.
AMNA NAWAZ: Powell today spoke to that issue.
JEROME POWELL, Federal Reserve Chairman: It's 100 percent certainty that there will be independent investigations.
When a bank fails, there are investigations.
And, of course, we welcome that.
AMNA NAWAZ: The Fed is also reconsidering rules for midsized banks around liquidity and stronger capital, something Warren and others say they strongly support.
Chairman Powell also repeatedly said today that he thought the banking system is -- quote - - "sound and resilient."
For a closer look at these decisions and the state of the economy, I'm joined by Kenneth Rogoff.
He's an economics and public policy professor at Harvard University and the former chief economist at the International Monetary Fund.
He's also the author of several books on financial crises.
Ken, welcome back to the "NewsHour."
So let's just start with the news of the day.
What do you make of the Fed's decision?
KENNETH ROGOFF, Economist, Harvard University: Well, I think they pretty much did the only thing they could.
A couple of weeks ago, Jay Powell was warning everyone: I'm going to raise things 50 basis points.
Well, after we're really in start a possibly a banking crisis ongoing here, that's out the door.
But I think he was worried that, if he set it at zero, everybody thinks, well, what do they know that we don't?
And so he said, I'm going to keep pushing with inflation.
But I think, really, they are very nervous of not knowing, is inflation going to go higher.
Is the banking crisis going to get worse?
It's a tough place to be in right now.
AMNA NAWAZ: Would this have been different, would we be having a different conversation today if we hadn't just seen the second largest bank failure in U.S. history and the entire banking industry wasn't on eggshells?
KENNETH ROGOFF: Oh, absolutely.
I mean, inflation is still high.
It whatever -- people thought it was going to go away.
It isn't either.
There are lots of different measures of it, but it looks like it's going to last for quite a while.
Even on the most relatively optimistic Fed forecasts, it's still well above their target at the end of the year.
So they don't want that.
The reason they don't want that is, if they allow that to happen, interest rates might creep up to take that into account.
And that's really what they want to nip in the bud.
But we have this banking crisis.
AMNA NAWAZ: So we have heard a lot over the last year about working towards a soft landing, right, slowing the economy enough to curb demand, bring down inflation, but not so much as to spark a rise in unemployment.
Do you see that soft landing as still possible?
KENNETH ROGOFF: Honestly, I think what they're going to do now is fly over the airport.
And, by that, I mean, leave inflation higher for longer, whatever they're saying.
I think that's what they're going to decide to do, because if they raise interest rates as much as they might need to -- and they say they might -- we might get things worse in the banking sector.
And I don't think they're ready for that, even though they -- we're being told left and right that everything's really sound.
By the way, deposits are fine.
The real questions, are they going to be making loans in the same way?
Is it going to be harder to get a mortgage, harder to get a car loan, harder to get a business loan.
I think that's a real concern now.
AMNA NAWAZ: Well, you say deposits are fine, but, clearly, people are nervous.
We know those previous rate hikes helped to erode the value, right, of many of those bank assets and bank failures to prepare for that, manage around them, partially led to some of those collapses.
Should Americans be concerned about right now small and midsized banks, about their futures?
KENNETH ROGOFF: I feel like the Federal Reserve and the Treasury have kind of broadcast that they're going to protect depositors, even ones with billions of dollars they have bailed out with Silicon Valley Bank.
I think they're going to continue that.
That has a lot of problems, because bankers will do more risky things.
It's going to lead to bigger problems in the future.
But they really telegraphed that.
The problem is, the other side of the coin is that everyone's worried the banks will not be able to lend as much.
The regulators are going to be looking harder.
They're going to have to raise deposit rates, and they will have less profits to lend out.
So, for the moment, it looks like they have contained the panic.
But, longer term, bankers do risky stuff, and they certainly aren't reining that in.
And the more they regulate it, the harder it's going to be to get loans.
So there are certainly problems ahead.
AMNA NAWAZ: Ken, you did hear some of those concerns from lawmakers about the Fed's oversight ability.
Given what we know, do you believe the Fed is up to the job of monitoring the banks, as it's meant to be?
KENNETH ROGOFF: Well, yes and no.
I mean, it's a very professional-grade staff.
But there are problems with the governance of the Fed.
There's the center in Washington that everyone talks about, but there are the regional Feds, which have their own world of governance.
And, typically, the board of directors will have people from the financial sector.
I was very concerned about that in 2008.
And they even appointed someone from Goldman Sachs to run the New York Fed, the most important regional Fed.
And I believe the CEO of Silicon Valley Bank was on the board of directors of the San Francisco Fed regulating the Silicon Valley Bank.
So that's been a problem.
I don't know what the Fed has to say about that, but I feel like that ought to be addressed.
AMNA NAWAZ: That is Kenneth Rogoff, economics professor at Harvard University, former chief economist at the IMF.
Thanks for joining us.
KENNETH ROGOFF: Thank you.