The Fed and other central banks are adamant that keeping inflation expectations anchored at a low level is key to their success in managing inflation. This was at least part of the argument for why the Fed hiked interest rates so aggressively during the spring and summer of last year. There is an increasing amount of evidence that empirically, inflation expectations really don’t matter that much, as I have explained
I wonder if one reason some of the public associates higher interest rates with higher inflation is because when high inflation is in the news discussion of rising interest rates is also in the news, so people make that association but end up getting the causal link backwards.
Private banks printing unlimited counterfeit money leads to inflation. Raising interest rates slows people and businesses from creating debt aka stagflation. Rinse and repeat. IMHO
My view is that the rate hikes don't lead. I side with the public when it treats high costs from real economy shortages as no different from the high costs of borrowing. Maybe raising one cost doesn't lower another. It just doubles the pain.
The only way rate hikes can significantly lower prices is by crashing the economy and bleeding jobs.
We'd be better off letting inflation subside as supply repairs itself. The leeches aren't helping.
I wonder if one reason some of the public associates higher interest rates with higher inflation is because when high inflation is in the news discussion of rising interest rates is also in the news, so people make that association but end up getting the causal link backwards.
Private banks printing unlimited counterfeit money leads to inflation. Raising interest rates slows people and businesses from creating debt aka stagflation. Rinse and repeat. IMHO
My view is that the rate hikes don't lead. I side with the public when it treats high costs from real economy shortages as no different from the high costs of borrowing. Maybe raising one cost doesn't lower another. It just doubles the pain.
The only way rate hikes can significantly lower prices is by crashing the economy and bleeding jobs.
We'd be better off letting inflation subside as supply repairs itself. The leeches aren't helping.