Fed’s Tighter Interest Rate Stance Likely To Prolong Economic Slump

Source: Cobden Centre
by Dr. Frank Shostak

“In response to the strengthening in the yearly growth rate of the consumer price index (CPI) to 8.6% in May from 5% in May last year, on Wednesday June 15, 2022, the US central bank (Fed) raised the policy interest rate …. Fed officials are of the view that the correct approach to counter this massive increase in the CPI is to raise interest rates. A tighter interest rate stance, it is held, is going to cool off the demand for goods and services. This in turn, is likely to weaken the growth rate of the CPI labelled as inflation. … If Fed officials were to concede that inflation is about increases in the money supply then they would have had to accept that the key cause behind strong increases in prices is the alleged inflation fighter the Fed itself.” (06/22/22)