Rate Hikes increase cost of borrowing. Putting more money into the system, making the dollar worth less. Do I have that right? Rate Hikes work by assuming that Americans are smart with their money and will consume less but is this reasonable? It makes no sense to me yet every economists seems to agree.
EDIT: This was probably a bad ELI5. So I appreciate the responses, very helpful. Learning more now.
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No, you got it the wrong way around. Rate hikes increase the cost of borrowing, and this **decreases** the amount of money in the system, making the dollar worth more.
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