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In reply to the discussion: Fed raises rates by another three-quarters of a percentage point, pledges more hikes [View all]hot2na
(356 posts)4. The economy is overcooked right now.
Basically the economy is on overdrive and that is what leads to inflation. Interest rates slow the economy down. See the article below.
https://www.washingtonpost.com/business/2022/09/20/fed-interest-rate-hike-inflation/
How does raising interest rates affect inflation?
Inflation happens when theres a mismatch of supply and demand in the economy. During the pandemic, for example, so many people wanted to buy cars that factories couldnt keep up. Families relocated and scoured for new houses, but there werent enough available. So cars and houses got more expensive.
The Fed cant do anything to boost chip manufacturing or build more houses, which would fix the supply side of the equation. So it has to focus on slowing down demand instead. It wants fewer people to buy new cars or put in bids for houses, which would bring prices down.
When the Fed raises its benchmark interest rate, it makes all kinds of lending more expensive. Mortgage rates go up. So do auto loans. And over time, that helps supply and demand get back in sync.
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Fed raises rates by another three-quarters of a percentage point, pledges more hikes [View all]
BumRushDaShow
Sep 2022
OP
Interest rates are an opportunity cost. Companies are more likely to produce now than for the future
mathematic
Sep 2022
#19
Our trade deficit hangs out around 3% of GDP, so yeah, we produce plenty here
mathematic
Sep 2022
#64
Monetarists claim that by doing so, you slow the economy, demand - and thereby prices
peppertree
Sep 2022
#9
Here's a good article explaining the impact to main street local economies
IronLionZion
Sep 2022
#63
Powell's Fed was 9 months late to end the party, this would have been easier a year ago
bucolic_frolic
Sep 2022
#8
I bought stocks on sale back in mid-June after the S&P 500 entered a bear market (more than 20% down
progree
Sep 2022
#30
My fear is that the FED will cause another recession, which they've often done.
Lonestarblue
Sep 2022
#32
So the poor can't buy homes or cars. Yeah that's going to solve the problem. NOT
onecaliberal
Sep 2022
#35
S&P 500 closed down 1.71%, the DOW down 1.70% (522 points) -- just to set the scene for
progree
Sep 2022
#41
Yeah, the Fed has pretty much thrown in the towel on the so-called soft-landing, buckle up peoples
Shanti Shanti Shanti
Sep 2022
#42
We should be happy it won't take the extreme rate increases that Paul Volcker implemented 1979-83
andym
Sep 2022
#46
Ughh, I forgot, the S&P 500 is back in bear market territory, down 21.0% from its all-time-high
progree
Sep 2022
#47
a few weeks ago i started reading my 1989 grieder book about the fed reserve. secrets of the
pansypoo53219
Sep 2022
#51