The tap still left open

Continuing fiscal laxity in the US means monetary policy must do more of the inflation fighting, increasing risks of financial accidents

Volatility in stock prices of US banks has persisted, even as the concern about deposits has receded. Since policymakers have protected depositors in their interventions in failed banks, but equity holders have generally been wiped out, it is not surprising that shareholders of banks with large unrealised losses are worried.

The challenges, though, run deeper. While the surge in deposit outflows seen in March has abated, the steady fall that began a year ago is likely to continue. The quantity of money in the US (as measured by M2, or broad money) by early April was $1.2 trillion less than at