The Federal Reserve faces a difficult decision at its meeting that ends this afternoon: Should Fed officials raise interest rates in response to worrisome recent inflation data — and accept the risk of causing further problems for banks? Or should officials pause their rate increases — and accept the risk that inflation will remain high?

This dilemma is another reminder of the broad economic damage that banking crises cause. In today’s newsletter, I’ll first explain the Fed’s tough call and then look at one of the lessons emerging from the current banking turmoil. Above all, that turmoil is a reminder of the high costs of ineffective bank regulation, which has been a recurring problem in the U.S.

The Fed’s dilemma

The trouble for the Fed is that there are excellent reasons for it to continue raising interest rates and excellent reasons for it to take a break.

On the one hand, the economic data in recent weeks has suggested that inflation is not falling as rapidly as analysts expected. Average consumer prices are about 6 percent higher than a year ago, and forecasters expect the figure to remain above 3 percent for most of this year. That’s higher than Fed officials and many families find comfortable. For much of the 21st century, inflation has been closer to 2 percent.

An inflation rate that remains near 4 percent for an extended period is problematic for several reasons. It cuts into buying power and gives people reason to expect that inflation may stay high for years. They will then ask their employers for higher wages, potentially causing a spiral in which companies increase their prices to pay for the raises and inflation drifts even higher. Today’s tight job market, with unemployment near its lowest level since the 1960s, adds to these risks. The economy still seems to be running hotter than is sustainable.

This situation explains why Fed officials had originally planned to continue raising their benchmark interest rate at today’s meeting — thereby slowing the economy by increasing the cost of homes, cars and other items that people buy with debt. Some Fed officials favored a quarter-point increase, which would be identical to the increase at the Fed’s meeting last month. Others preferred a half-point increase, in response to the worrisome recent inflation data.

The banking troubles of the past two weeks scrambled these plans. Why? In addition to slowing the economy, higher interest rates depress the value of many financial assets (as these charts explain). Some bank executives did a poor job planning for these asset declines, and their balance sheets suffered. When customers became worried that the banks would no longer have enough money to return their deposits, a classic bank run ensued. It led to the collapse of Silicon Valley Bank and Signature Bank, and others remain in jeopardy.

If Fed officials continue raising their benchmark rate, they risk damaging the balance sheets of more banks and causing new bank runs. That’s why a half-point increase now seems less likely. Some economists (including The Times’s Paul Krugman) have urged the Fed to avoid any additional increases for now. Many analysts expect the Fed will compromise and raise the rate by a quarter point; Jason Furman, a former Obama administration official, leans toward that approach.

The decision is unavoidably fraught. The Fed must choose between potentially exacerbating problems in the financial markets and seeming to go soft on inflation.

Why bailouts happen

All of which underscores the high cost of banking crises. In most industries, a company’s collapse doesn’t cause cascading economic problems. In the financial markets, the collapse of one firm can lead to a panic that feeds on itself. Investors and clients start withdrawing their money. A recession, or even a depression, can follow.

These consequences are the reason that government officials bail out banks more frequently than other businesses. Bailouts, of course, have huge downsides: They typically use taxpayer money (or other banks’ money) to subsidize affluent bank executives who failed at their jobs. “Nobody is as privileged in the entire economy,” Anat Admati, a finance professor at Stanford University’s business school, told me.

During a crisis, bailouts can be unavoidable because of the economic risks from bank collapses. The key question, then, is how to regulate banks rigorously enough to minimize the number of necessary bailouts.

Over the past few decades, the U.S. has failed to do so. After the financial crisis of 2007-9, policymakers tightened the rules through the Dodd-Frank Act. But Congress and the Trump administration loosened oversight for midsize banks in 2018 — and Silicon Valley Bank and Signature Bank were two of the firms that stood to benefit.

As complicated as finance can be, the basic principles behind bank regulation are straightforward. Banks require special scrutiny from the government because they may receive special benefits from taxpayers during a crisis. This scrutiny includes limits on the risks that banks can take and requirements that they keep enough money in reserve to survive most foreseeable crises. “You make sure they have enough to pay,” as Admati put it.

Bank executives and investors often bristle at such rules because they reduce returns. Money held in reserve, after all, cannot be invested elsewhere and earn big profits. It also can’t go poof when hard times arrive.

More on the economy

• Treasury Secretary Janet Yellen said the Biden administration was prepared to take additional action to protect smaller banks.

• On today’s episode of “The Daily,” Barney Frank, an architect of the banking rules, reflects on whether he contributed to the bank failures.

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Sitting in a small courtroom flanked by her two lawyers last month, Olesya Krivtsova was facing a stiff penalty for her fondness for posting on social media. Barely 20 and until this year a university student in northern Russia, she was accused of “justifying terrorism” and “discrediting the Russian armed forces,” and was facing up to a decade in prison.

Her apparent crime? An Instagram post asking why Ukrainians had rejoiced when the main bridge to Russian-occupied Crimea was attacked in October.

The post eventually landed Ms. Krivtsova on the Kremlin’s official list of terrorists and extremists. She was placed under house arrest and forbidden from using the phone or the internet.

Ms. Krivtsova did not wait for a courtroom verdict: Last week, she fled the country.

“I decided to leave because I was desperate,” Ms. Krivtsova said by telephone on Friday from Vilnius, Lithuania. “It is impossible to prove anything to the Russian court.”

As the Kremlin intensifies its crackdown on free speech, social media platforms have become a more frequent target for punishment. The government is increasingly penalizing people for posts it considers critical of the fighting in Ukraine — with fines, imprisonment and, in extreme cases, temporarily losing custody of their children.

In the Ryazan region south of Moscow, for instance, investigators opened a criminal case against a man who posted a joke about the Russian retreat from Kherson, in southern Ukraine. A student who ran an antiwar channel on the messaging app Telegram was denounced by the rector of his university for posts that criticized the Kremlin’s invasion of Ukraine as well as alleged Russian atrocities in Bucha and Mariupol. This month, he was sentenced to eight and a half years in a penal colony.

The crackdown on social media comes as Russia also moves against activists, rights groups and news media outlets that express or report on antiwar sentiment, part of what critics say is a chilling effort to eliminate viewpoints that diverge from the Kremlin’s propaganda. President Vladimir V. Putin took the opportunity to burnish the state’s messaging this week as he appeared with China’s top leader, Xi Jinping, in Moscow.

“This is the logic of intimidation,” said Sergei Smirnov, the editor in chief of the Russian news outlet Mediazona, which reports on the country’s criminal justice system. “We are dealing with a police state that believes that we should simply punish more severely so that there are fewer and fewer people who express their opinion openly.”

Ms. Krivtsova’s case had resonated among rights activists and opponents of the war in Ukraine — as a symbol of bravery for ordinary Russians, but also as a cautionary tale for anyone who would dare follow in her footsteps. Her posts — on a private Instagram story available only to friends — were reported to officials by her fellow students at Northern (Arctic) Federal University, some of whom she knew personally.

“I understand if a person refuses to speak out for his safety, because the consequences are serious not only for the person, but for the whole family, for all their loved ones,” she told journalists before a recent court hearing. “Everything that I’m going through right now is terrible.”

This week, the Russian government added her to the federal wanted list, and a court ruled that she be arrested in absentia, according to Russian news media.

Almost 6,000 Russians have been accused of discrediting the Russian Army since the invasion, according to OVD-Info, a rights group that tracks political repression. Of those, more than 2,000 cases are related to comments posted on social media, the group said.

Russia treats the first charge as an administrative offense, which usually comes with a fine or some prison time. But a repeat offense — which can even involve a social media post from years in the past — carries criminal liability and a potential sentence of 10 years.

There are 447 defendants facing criminal charges for antiwar activity in Russia, according to OVD-Info. Most are charged with “disseminating false information,” but Ms. Krivtsova and several dozen others are charged with “justifying, promoting and inciting terrorism.”

Ms. Krivtsova said she realized that her chances of being exonerated were greatly diminished after train tickets were purchased in her name. She denied buying the tickets and said she believed the security services had done so to imply that she would attempt an escape. The prosecution was unable to provide any evidence showing that she had bought them.

Ms. Krivtsova said she believed that things in Russia would continue to deteriorate for some time.

“When I committed this crime,” she said, referring to the charge of discrediting the military, “the sentence was for three years, now it is five. And I know that things will get worse, that there will be criminal liability not even for public expressions but for private beliefs. Everything is building toward that.”

Since Russia’s full-scale invasion of Ukraine in February 2022, the state has placed even tighter limits on free speech, banning websites and social media platforms and making it a crime to share information about the war that did not come from a state source. Though Facebook and Instagram are banned in Russia, people still use them through workarounds, along with Telegram and VKontakte.

The long arms of the bureaucratic state are enforcing the new policies — but they have help from ordinary people who are serving as its eyes and ears. Ms. Krivtsova said she was unaware that a group of students at her university had formed their own group chat to discuss the posts of students who oppose the war with a view toward denouncing them.

Shortly after Mr. Putin ordered a full-scale invasion of Ukraine, Ms. Krivtsova posted comments on social media condemning the war. On May 9, the day Russia commemorates its contributions to defeating Nazi Germany in World War II, Ms. Krivtsova took her activity a step further: She printed and distributed leaflets around Arkhangelsk, a regional capital on the White Sea, pointing out that there are World War II veterans still living in Ukraine, some of whom had died under Russian shelling. She called for an end to the war.

The next day, officials from the Center for Combating Extremism forced her to “apologize to the Armed Forces of the Russian Federation on camera,” she said. They also extracted a written confession and charged her with “discrediting” the armed forces.

Ms. Krivtsova continued to express her opinions online, something that had been tolerated before the invasion.

In October, after the Ukrainian attack on the bridge to Crimea, which Russia illegally annexed in 2014, Ms. Krivtsova wrote a post in which she sought to understand the source of many Ukrainians’ glee over the episode, which Moscow considers an act of terrorism. A screenshot appeared in her classmates’ chat group — with the comment that it was surely illegal.

“Denunciation is the duty of a patriot,” one of the students wrote, according to screenshots of the discussion viewed by The New York Times.

One friend in the group saw the chat and warned her. But she did not think her classmates would really go through with it.

The head of her department lauded the students who denounced her.

“Society is a social organism, and it can get sick,” said Artyom V. Makulin, the head of the humanities program. “Every society has an immune system.”

He said he believed students like her had been under the influence of “ideological hypnosis.”

Ms. Krivtsova said she had never met Mr. Makulin personally, but she said that did not stop him from writing a negative character reference about her for her court appearance.

On campus, a vast majority of students approached by a Times journalist said they did not know about Ms. Krivtsova’s case. Those who did said they would not discuss the topic of the war online or even among their friends and classmates.

One freshman history student, Aleksandr, who did not give his surname for security reasons, said it was “beyond scary” to study in an environment where students could condemn you to years in prison.

In Vilnius, Ms. Krivtsova has a lot on her to-do list: finding an apartment, a job and a new set of clothes, because she left in disguise wearing a “terrible, shabby masculine jacket.” She said she had come to terms with the fact that she would probably never see her grandmother again.

But she finally has one thing she could not have in Russia. In a video she posted after her escape, she showed herself cutting off the ankle bracelet she had worn during house arrest. A tattoo of a spider with Mr. Putin’s face that says “Big brother is watching” was visible on her other leg.

She held up a drawing of a broken set of handcuffs accompanied by one word: “Freedom.”

JERUSALEM — At a workshop on the edge of the Aqsa Mosque compound, Muhammad Rowidy spends hours hunched over panes of stained glass, painstakingly carving through white plaster to reveal geometric designs. While he works, there is a thought he can’t shake.

“You see this,” he said, pausing and leaning back, “this takes months to finish, and in one minute, in one kick, all this hard work goes.”

Mr. Rowidy and dozens of other Palestinian artisans and workers maintain and restore the historic mosques and other structures in the 35-acre Aqsa Mosque compound revered by Muslims as the Noble Sanctuary and by Jews as the Temple Mount. They are bracing for more unrest.

The Muslim holy month of Ramadan starts on Wednesday and overlaps with the Jewish holiday of Passover in early April, raising worries that the larger numbers of worshipers and visitors to the contested site will increase the possibility of clashes.

The artisans there — including a gold-leaf specialist, coppersmiths and wood carvers — fear that their meticulous work will be destroyed, as has happened in years past. Their frustrations have been intensified by the tighter control Israel has exerted over the compound in recent years, making repairs more difficult.

The workers at the mosque, the third holiest site in Islam, need approval from the Israeli authorities for repairs or replacements, down to every broken window or smashed tile, according to the workers, administrators of the site, and Israeli rights groups.

Jews believe that the compound is the location of two ancient temples and consider it the holiest site in Judaism. In recent years, Jewish worshipers have prayed inside the compound, a violation of an agreement that has been in place since 1967.

With the overlapping holidays this year, there are concerns that increased visits and unauthorized prayers could provoke further clashes between the Israeli police and Palestinians, as has been the case in previous years.

The atmosphere is already tense amid an escalation of violence in the Israeli-occupied West Bank. It has been the deadliest start of a year for Palestinians in the territory in more than two decades as settler violence increases and as Israel steps up lethal raids in response to a series of attacks by Palestinian armed groups.

Clashes at the Aqsa compound between baton-wielding riot police shooting tear gas and sponge-tipped bullets and Palestinians throwing stones and fireworks have left a trail of broken windows and other damage in recent years. After the violence, Mr. Rowidy and his colleagues are left to pick up the pieces.

Broken stained-glass windows line the top of the Qibli Mosque, one of two main structures inside the Aqsa compound, along with the Dome of the Rock, a gold-domed prayer hall.

The artisans say it can sometimes take years to secure approvals for repairs.

Bassam al-Hallaq, an architect who has worked at Al Aqsa Mosque for more than 40 years, overseeing artisans and workers, said that in 2019, the Israeli police detained and handcuffed him for hours after he tried to replace a tile without approval. He keeps newspaper clippings about his experience taped to a filing cabinet in his office as a reminder.

“The occupation wants to assert that it is in control and nothing happens without their approval,” Mr. al-Hallaq said, referring to Israel’s hold on East Jerusalem. “They are not operating according to the agreement” governing the compound, he added.

The Israeli police said that maintenance at the site was “not under the responsibility” of officers. But, to maintain security and order, the police said, “coordination and escort are required.””

Incidents at the compound have often served as a spark in the broader Palestinian-Israeli conflict.

In 2000, a trip to the site by Ariel Sharon, who later became Israel’s prime minister, surrounded by hundreds of police officers, set off the second intifada, or Palestinian uprising. More recently, the security minister in Israel’s right-wing government, Itamar Ben-Gvir, angered Palestinians and regional Muslim states by visiting the compound.

Mr. al-Hallaq said the relationship between the compound’s workers and the police began to fray after Mr. Sharon’s visit. But the workers said that the situation had become particularly difficult in the past few years.

The police did not respond to a question about why approval to fix all the windows at the Qibli Mosque had not been given.

The Jerusalem municipality referred questions to the prime minister’s office. The prime minister’s office did not respond to the requests for comment.

The compound’s oversight is handled by an Islamic trust called the Waqf, controlled and funded by Jordan under an unwritten agreement with Israel, which has overall security authority and maintains a small police station inside.

Israel says that there has been no change to the status quo that has existed at the site since the country captured and annexed East Jerusalem, including the Old City and the Aqsa compound, in 1967. Much of the world sees that annexation as illegal and does not recognize Israeli sovereignty over East Jerusalem.

The police have in the past few years increased their presence inside the compound, including monitoring the artisans’ work and escorting Jewish worshipers, said Yitzhak Reiter, president of the nonprofit Middle East and Islamic Studies Association of Israel who specializes in conflict resolution in holy places.

The relationship between the police, the Waqf administrators and the artisans who work at the compound has devolved into a give-and-take, Mr. Reiter said.

“So they negotiate every small piece of work and they expect to get something in return,” such as reviewing Friday sermons before they are delivered, he said of the Israeli authorities.

During police raids into the compound and clashes last year, officers barricaded Palestinian worshipers, including some who had thrown stones, into the Qibli Mosque and padlocked the doors, damaging handles and wood, according to witnesses and videos. Officers then climbed onto the roof and broke windows to fire tear gas and sponge-tipped bullets at those inside. The Palestinians threw rocks back.

Mr. Rowidy, 41, said it was easy to tell which side had broken which windows. Those completely smashed were done by the Israeli police with batons, he said. A video posted on Facebook during the unrest shows one of the windows being broken, with what appears to be a baton, from the roof outside.

In comparison, Palestinians who threw stones had knocked large holes in the windows, he said.

In the workshop, Bassam Ayesh, 42, watched Mr. Rowidy working on a semicircular window from the Qibli. The glass was damaged last year, initially by Palestinians, before being completely destroyed by Israeli officers, who used the opening to shoot tear gas and sponge-tipped bullets into the mosque, Mr. Rowidy said.

“As we work on it, we say to each other, ‘How long will this last? Five minutes?’” said Mr. Ayesh, who draws the geometric designs for each window.

Mr. al-Hallaq, the architect, studied in Greece before returning to work at the mosque he grew up praying in. Most of the workers learn their trade inside the compound as older generations pass down knowledge and techniques, Mr. Rowidy said.

After Ramadan last year, the artisans took down the window’s wooden frame, removed the broken glass and plaster, and began a careful reconstruction.

First, they set a new sheet of glass and poured plaster on both sides. Mr. Ayesh then drew the geometric design on the plaster in soft charcoal.

Using a small pick, Mr. Rowidy slowly moved along the outlines, removing plaster bit by bit to reveal the glass underneath. In the workshop, the only sounds were the scratching of pick against plaster, a fan and a recitation of the Quran playing in the background.

Outside, in the courtyard next to the Dome of the Rock, some of their colleagues worked to fix an underground pipe. Two police officers kept watch.

Nearby, heavily armed police escorted Jewish worshipers around the compound. Some of them openly prayed.

Taking a break from working on the window, Mr. Rowidy entered the Qibli Mosque and surveyed the broken windows, some dating to the Ottoman Empire, that he hopes to repair one day.

“When a window like this gets broken, God, my heart gets broken with it,” he said, pointing at a large pink and blue window. “I’m worried about the days to come.”

Hiba Yazbek and Gabby Sobelman contributed reporting.

Britain’s inflation rate unexpectedly rose last month, reversing its recent downward trend and potentially undermining expectations that the Bank of England was close to halting interest rate increases.

Consumer prices in Britain rose 10.4 percent in February compared with a year earlier, the Office for National Statistics said on Wednesday. The rate had slowed for three consecutive months, to 10.1 percent in January after it peaked in October at 11.1 percent, the highest in more than four decades. The Bank of England’s rate-setters are scheduled to announce their next policy decision on Thursday.

On a monthly basis, prices rose 1 percent in February, the biggest jump since October. Higher prices in restaurants and hotels were the largest contributing factor, as alcohol prices were raised in pubs after discounts in January, according to the statistics agency. Food inflation continued to accelerate, with prices rising at an annual rate of 18 percent, from 16.7 percent in January.

“Food and nonalcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing,” Grant Fitzner, the chief economist at the statistics agency, said in a statement.

The swing higher in inflation will come as an unwelcome intensification of Britain’s cost-of-living crisis. High household energy bills, wage growth that has lagged far behind inflation and more expensive food and other essential items have contributed to a steep decline in living standards. Earlier this month, the Office for Budget Responsibility, an independent fiscal watchdog, predicted that the inflation-adjusted decline in household disposable income this year and last year would be the biggest fall in living standards in records going back to the 1950s.

Even as wholesale energy prices, the biggest driver of inflation last year, have fallen, the central bank has been cautious about declaring any victory in its battle against inflation.

The Bank of England was the first major central bank to begin raising interest rates in December 2021, amid rapidly escalating energy prices. Since then, the central bank has raised rates by nearly 4 percentage points in an effort to stop high inflation becoming embedded in the economy. Policymakers have been particularly alert to higher services prices and signs that private sector wages were climbing rapidly, which would make it difficult to return inflation to the bank’s 2 percent target.

Recently, analysts had predicted that it could be the first major central bank to halt rate increases. Inflation is expected to slow substantially this year, with the annual rate falling to 4 percent by the end of the year, the Bank of England forecast.

Last month, Andrew Bailey, the central bank governor, said there had been a “turning of the corner” on inflation, but he cautioned that it was “very early days, and the risks are very large.” Still, policymakers have changed their language on the outlook for interest rates, removing the presumption that they would raised even higher. Instead, policymakers said “if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” according to the minutes of the February policy meeting.

The data released on Wednesday shows how uncertain the inflation outlook remains. The annual rate of core inflation, a measure that strips out volatile energy and food prices and is used to gauge how deep inflation is in the economy, rose to 6.2 percent last month, from 5.8 percent in January. Services inflation jumped to 6.6 percent, from 6 percent in January.

This counters separate data published last week that would have brought some comfort to policymakers. That data showed the first slowing in wage growth since the end of 2021. Workers’ pay, excluding bonuses, rose at an annual rate of 6.5 percent in the three months to January, down from 6.7 percent in the three months to December, the statistics agency said.

As inflation appears to have peaked in many major economies, traders bet that central banks were close to their high point in interest rates. Two weeks ago, the Bank of Canada held its rate at 4.5 percent. It was the first time since January 2022 that it didn’t increase rates.

Since then, tumult at banks in the United States, particularly the collapse of Silicon Valley Bank, has complicated the choices central bankers face. The troubles in the banking sector have raised the prospect of policymakers being more cautious about pushing rates ever higher, not wanting to risk provoking a broader banking crisis.

The U.S. Federal Reserve sets interest rates later on Wednesday, with analysts split over whether it will continue raising interest rates.