I might also need a quick on inflation as well. All I can think is that they’re trying to de-incentivize interest-based purchasing but I don’t understand how that’s a fix for inflation.
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Inflation is when the value of your money erodes,i.e you have to pay more for goods and services. This could be beacuse of low supply and high demand that increases prices , higher cost that increase prices, or beacuse of increased money supply(lots of money in the economy for g&s whose production is the same. More demand, higher prices).Usually 2 or more of these in combination.
An overlooked driver of inflation is the EXPECTATION OF INFLATION.
When the fed increased rates, it signals a higher cost for loan and credit, so people do not spend as much using credit(credit spending is a very large percentage of total spending).This also decreases investment in speculative investments(stocks, new businesses etc).
This signal from the fed also drives down the expectation of inflation in the future. Pretty soon the economy cools down till the next boom.
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