by Chris Black
I have said that raising interest rates is actually going to increase inflation. People have confronted me about this, but what I’ve said is actually very simple and obvious:
Raising interest rates lowers the wealth of the people, and while it should also reduce inflation, it actually means that more entitlements are necessary, which means the government printing more money than the interest rates save.
Very simple.
Raising interest rates is only a valid way of digging out of an inflation spiral if you do not have entitlements.
They are trying to make it seem like things are better before the midterms, then they will stop pretending.
US inflation rose by a higher-than-expected 8.3% in August despite falling gasoline prices — adding pressure on the Federal Reserve as it decides whether to impose another super-size interest rate hike.
The August reading of the Labor Department’s Consumer Price Index, a closely watched measure of the costs of goods and services, rose 0.1% compared to July — surprising economists who had expected a slight month-over-month decline.
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The latest inflation report will factor into the conversation as Fed officials meet on Sept. 20 and 21 to discuss their next interest rate hike.
During a speech last week, Powell said the Fed was wary of “prematurely loosening policy” and was “strongly committed to this project and we will keep at it until the job is done.” He had previously warned of “some pain” for households due to the interest rate hikes.
Meanwhile, Fed Vice Chair Lael Brainard said last week that the bank was “in this for as long as it takes to get inflation down.”
Ahead of the August CPI report, investors were pricing in a whopping 86% probability that the Fed would hike its benchmark rate by three-quarters of a percentage point for the third consecutive time, according to CME Group data.
The market saw just 14% probability of a smaller half-point hike –a increase that would still be higher than normal.