> Historically, the euro has generally been a good bit more valuable than the dollar. But in 2022, the dollar was more valuable than the euro at a point That's

> Historically, the euro has generally been a good bit more valuable than the dollar. But in 2022, the dollar was more valuable than the euro at a point That's what inflation does. People are routinely taught that inflation is the “decline of value of money”, but that's not the reality. Inflation is just the increase in consumer price, which is perceived as a decline in the relative value of the money, but its absolute value on foreign markets isn't (directly) affected by inflation. And when the Central bank raise the interest rate to cool the economy down and temper inflation, then the absolute value of the money rises (because the higher the interest rates, the pricier the currency on the FX market). This increase in the currency value in turn also helps fighting inflation because it lowers the cost of imported goods. So, indirectly, because of the central bank's reaction, inflation is actually increasing the absolute value of money, and this is what we saw in 2022 when the Fed raised the interest rates 9 month or so before the ECB start doing the same (because the inflation came in advance for the US compared to EU).