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It's the same diagnostic but the cause if different. Raising the interest rate to lower the inflation has a big impact in unemployment and in the whole economy.
by satao 5y ago
It's the same diagnostic but the cause if different. Raising the interest rate to lower the inflation has a big impact in unemployment and in the whole economy. If the fed thinks the inflation is caused by a temporary supply shortage, then I agree that there's no need to mess with the interest rate. More unemployment now might be worse than a bit of inflation for one or two years.
- seanmcdirmid 5y agoThey would raise interest rates, not the tax rate.
- satao 5y agoSorry, not a native english speaker. I have edited the comment.
- seanmcdirmid 5y agoNP, but it wouldn't necessarily be a language problem to assume the government would raise taxes to work against inflation. It would work to some degree (taking money out of the economy, increasing monetary friction), but that approach isn't politically feasible in most countries. Instead, most countries rely on interest rates and public spending (which might involve printing more money).