One common explanation is that inflation is a self-fulfilling prophecy. Let's say, you have $1000 today that can buy you a certain gadget. You know that you won

One common explanation is that inflation is a self-fulfilling prophecy. Let's say, you have $1000 today that can buy you a certain gadget. You know that you won't need it until the next year, but in a year that same gadget will cost $1200 due to inflation. So you buy it right now for $1000, even though you could get by for another year. This increases the amount of money bidding for a limited supply of gadgets, so the seller can easily rise the price to $1100 right away, speeding up inflation even further. To combat this, the interest rate is raised to the point where you could put your $1000 to the bank, get $1200 in a year, and still buy that gadget. Fewer people are competing for it right now, so if the seller raises the asking price for $1100, many people would rather overpay right away. In reality, we have been printing money like crazy ever since 2008 [0], but rather than immediately raising the price of bread and beef, it went into speculative investments (VC bubble, crypto), assets (housing), bullshit jobs (exponentially growing number of bureaucrat jobs), etc. Now the Ukrainian war and Chinese COVID policies have disrupted some supply chain mechanisms that worked out of inertia, and it turns out we might have killed the mechanisms that would otherwise kick in and redistribute the weight. Nobody wants to step up and produce more stuff - we got too used that we can just print more money and have someone else accept is for payment. Except now we are running out of eager participants, so more and more money is being pulled out of that hip dog spa startup and is bidding up the prices of bread and rice. I don't think the rates will fix the inflation overnight, but they may start a long and painful process of incentivizing more productive work, rather than asking for a bailout in the loudest way. And we desperately need to do this because just printing more money without "printing" more oil, chips, foods and everything else will inevitably result in Venezuela-style hyperinflation, destroying the rest of the economy. You do not want to live through it, really. [0] https://tradingeconomics.com/united-states/money-supply-m0 https://tradingeconomics.com/united-states/money-supply-m0