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Solving this supply chain inflation by raising interest rate quite literally translates to - we will make people earn less so that they reduce demand for goods
by nine_zeros 5y ago
Solving this supply chain inflation by raising interest rate quite literally translates to - we will make people earn less so that they reduce demand for goods and services, thus controlling the inflation.
Raising too fast will cause a recession, solving the inflation problem. But then unemployment would be a problem and interest rates would go back down.
All this is to say, while it is imperative to raise rates now to control inflation, this solution comes at the expense of average people.
The real solution to supply side problems is for the government to fix - by making structural changes that enable supply to increase. E.g. reducing import tariffs in the short term, reducing production taxes (increase taxes on $500k+ earners and billionaires if you must) and making healthcare cheaper via open competition of providers (not of insurance)