Demand is currently greater than supply in so many ways (see: computer chips). A lot of inflation is because the suppliers can "gouge" customers. It's why the c

Demand is currently greater than supply in so many ways (see: computer chips). A lot of inflation is because the suppliers can "gouge" customers. It's why the car makers are really profitable but selling way less: they only sell the expensive versions of what they can make, and then there is gouging on top of that by the dealers for example. But if you raise rates, then consumers and business buyers can't access as much money on cheap credit, so they buy less / delay / make do with what they have. Demand for goods drops, so the difference between demand and supply evens out. But slowing the exchange of goods and services means GDP slows ... is another way of saying "recession". Western economies have been floating on zero/negative credit for so long to keep their economies "stable" aka propped up. We'll see what happens... If you don't understand why the FED changing interest rates has such cascading changes, it's because all the banks that you would get a loan from peg their interest rates to the FED's (plus a markup), because the FED supplies money to banks when they need at by loaning it to them ... at the federal rate.