Raising Interest Rates will not bring down Inflation in the short term
Seems like I am the only one taking crazy pills here...
Normally when inflation is high and interest rates are low, you raise them to help slow things down and bring down inflation.
However, these haven't been normal times.
The current bout of inflation isn't being caused by low rates, it's being caused by supply chain bottlenecks related to the Pandemic
Which means...
Raising rates probably won't impact inflation in the near term.
The last time I checked a 1% increase in the Federal Funds Rate didn't help unload a ship off the cost of LA, though perhaps I am missing something.
The danger here is that the FED raises rates and then looks at inflation data, no impact.
They raise rates again and look at inflation data, no impact.
So, they raise rates again and again and again, and pretty soon they raise rates enough where it does start to impact things, but in a negatively way.
It does start to impact inflation, but that is because they have raised rates so far that it has sent the rest of the economy into a recession.
Sounds like a good plan, right?!
I think your right. The furnace guy just came by and said it would take 6 weeks for a replacement part...he said a lot of parts are hard to come by these days.
Yep, sounds like the norm everywhere right now. Raising interest rates won't help you get your replacement part any sooner...
If I'm understanding your point right, I think I agree. Raising interest rates and rising inflation in our economic state today will do so much harm. People are already out of jobs and wages are low, so now the working class has to worry about inflation AND owing the government more money. Seems counterintuitive for raising standards of living.
wait you're talking about crypto and I'm talking about general economics. whoops.
No, you are right. I am talking about general economics, which will also impact financial assets like bitcoin/crypto. Raising interest rates won't help the supply chain bottlenecks, which is the crutch of the problem and causing the inflation...
Upvoted! Thank you for supporting witness @jswit.
Thanks.
the economic system every day more complicated
All informative economic articles with crazy pills in title should help us all.
That is the bottom line with economics - it's more art than science.
SO MANY variables simply throw clear logic out the window. Especially in unprecedented times like today.
I look forward to when we can look back on this in hindsight...
u can not predict nothing nowdays.