I recently read an article about OPEC, and how oil prices will likely rise for the next year or two. The article said this will cause a significant uptick in inflation indicators, so the Fed will likely raise rates.
I can understand raising rates in response to monetary inflation, but it doesn’t make much sense to me to raise rates in response to supply-side shocks. It also seems cruel since the goal seems to be to raise rates so more people become unemployed or underemployed so that can’t afford to buy gas.
Just want to upvote this because I think it’s very important. The feds toolbelt is vastly limited nowadays. They basically are using interest rates as the only lever they can pull.
Rates have basically been zero for the last 15 years. When the market normalizes zero percent rates, anything to the contrary will have a compounding negative impact.