If inflation lowers demand, would that not eventually offset inflation naturally without government intervention?

Question

If inflation lowers demand, would that not eventually offset inflation naturally without government intervention?

In: 42

Answer 1

Inflation becomes a vicious cycle when most workers see prices go up and then ask and receive wage increases. Prices go up, workers ask for raises. Companies grant the raises because they are selling their products for higher prices. Now it costs more in labor to make their products, so they raise prices again. Workers then ask for more raises. This cycle can only be broken by throwing cold water on demand through the central bank increasing interest rates.