I have said that raising interest rates is actually going to increase inflation. People have confronted me about this, but what I’ve said is actually very simple and obvious:
Raising interest rates lowers the wealth of the people, and while it should also reduce inflation, it actually means that more entitlements are necessary, which means the government printing more money than the interest rates save.
Raising interest rates is only a valid way of digging out of an inflation spiral if you do not have entitlements.
US inflation rose by a higher-than-expected 8.3% in August despite falling gasoline prices — adding pressure on the Federal Reserve as it decides whether to impose another super-size interest rate hike.
The August reading of the Labor Department’s Consumer Price Index, a closely watched measure of the costs of goods and services, rose 0.1% compared to July — surprising economists who had expected a slight month-over-month decline.
The higher-than-expected number was driven partly by stubbornly high prices for food and housing that continue to slam American households. Core inflation, which excludes volatile food and gas prices, rose 6.3% year-over-year — up sharply from the rate of 5.9% seen in June and July.
The CPI’s food index, meanwhile, surged 11.4%, its largest year-over-year increase since May 1979. Food prices were up 0.8% in the past month alone. Other household costs that rose included housing, medical care, new cars and home furnishings.
Both Fed Chair Jerome Powell and other top officials at the central bank have made clear that they plan to continue with rate hikes until inflation begins to meaningfully recede. Prices are still well above the 2% range for inflation that policymakers deem acceptable.
Ahead of the report’s release, economists expected headline inflation in August to jump 8% year-over-year but decline by 0.1% compared to July.
They predicted core inflation would rise 6% compared to last year and 0.3% compared to last month.
The latest inflation report will factor into the conversation as Fed officials meet on Sept. 20 and 21 to discuss their next interest rate hike.
During a speech last week, Powell said the Fed was wary of “prematurely loosening policy” and was “strongly committed to this project and we will keep at it until the job is done.” He had previously warned of “some pain” for households due to the interest rate hikes.
Meanwhile, Fed Vice Chair Lael Brainard said last week that the bank was “in this for as long as it takes to get inflation down.”
Ahead of the August CPI report, investors were pricing in a whopping 86% probability that the Fed would hike its benchmark rate by three-quarters of a percentage point for the third consecutive time, according to CME Group data.
The market saw just 14% probability of a smaller half-point hike –a increase that would still be higher than normal.
It’s dumb. You force people to the brink of starvation, and the government has to feed them. The government is not going to feed them without taking out a massive chunk to give to the banks, and Ukraine, and whatever other Jews are asking for a slice. So you end up with more inflation than you would have had if you would have just let 0% ride.
This is very obvious and self-explanatory, and it is shocking people would question me about it.
This whole “since 1979” thing is completely fake as well. It is based on fake numbers.
This is all worse that it has ever been, but the government/media know that it sounds very bad to say “worst ever in history,” so they make it sound like it was somehow worse at some other time in history.
It was never this bad.
And it’s just getting started, frankly.
They are trying to make it seem like things are better before the midterms, then they will stop pretending.