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Could interest rate hikes be keeping inflation high?
mystery-ak:
Could interest rate hikes be keeping inflation high?
by Tobias Burns - 04/23/24 6:00 AM ET
The stickiness of the post-pandemic inflation is raising questions about how effective high interest rates are at bringing down price increases – and if they could be fueling the problem.
Standard economic thinking says that higher interest rates should bring down prices by squeezing the labor market and lessening the demand for goods and services. Lower demand then forces companies to cut their prices.
Inflation began a rapid descent in the middle of 2022 but has remained above 3 percent for nearly a year, ticking up to 3.5 percent in March. Some experts are now questioning the logic behind rate hikes and asking if they may even be stimulating the economy toward further growth rather than slowing it down.
For that to work, the extra money made in the form of interest income from higher rates would need to be making its way back into the economy through consumer spending, thereby adding more fuel to price increases.
Investors and wealth managers say they’re seeing the signs.
“It’s people who have piles of cash that are generating more cash faster than they can spend it,” Ritholtz Wealth Management CEO Josh Brown said on the CNBC television network last week.
“I work in wealth management … I’m telling you, this segment of the population is not only not pulling back because rates are higher, but in many cases they feel like they’re doing better than ever.”
The Fed is poised to keep rates at the current baseline range of 5.25 to 5.5 percent at its next policy meeting in May after several hot employment and inflation reports. Fed Chair Jerome Powell said last week that the central bank has yet to see desired “progress” in its inflation fight and is prepared to keep rates higher for longer.
more
https://thehill.com/business/4612114-could-interest-rate-hikes-be-keeping-inflation-high/
LMAO:
It’s record-breaking deficits and printing money that’s keeping inflation high
Bigun:
--- Quote from: LMAO on April 23, 2024, 01:46:07 pm ---It’s record-breaking deficits and printing money that’s keeping inflation high
--- End quote ---
:yowsa: pointing-up
Fishrrman:
Judging from the title, it sounds like Mr. Burns is trying hard to turn the laws of economics inside out...
DB:
--- Quote from: Fishrrman on April 23, 2024, 09:32:11 pm ---Judging from the title, it sounds like Mr. Burns is trying hard to turn the laws of economics inside out...
--- End quote ---
You have to deny the obvious to tow the party line.
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