Furthermore, by artificially raising interest rates, the Fed continues to falsify interest rates signals.
Conversely, if the economy appears to be “overheated,” the central bank is expected to bring it onto the “stable” growth path by artificially raising interest rates.
According to some commentators, to counter inflation interest rates in the US must increase to a level that effectively restrains the economy.
Thus, if the economy falls into a recession, the central bank is expected to bring it onto the “stable” growth path by artificially lowering interest rates.
It is held that this increase in interest rates does not have to cause a recession if Fed’s policy makers could orchestrate a “soft landing.” The economy is portrayed as a spaceship that occasionally deviates from a path of “stable” economic growth and “stable” prices.
All that is required to fix the problem is for the central bank to give a suitable “push” to the economy (i.e., the spaceship) to bring it back to the right growth path.
Defining inflation For most commentators, inflation is regarded as a general increase in the prices of goods and services.
This leads to an expansion in the pool of real savings.
Conclusion Once an economic boom comes about because of loose monetary policies of the central bank, a tighter monetary stance activates an economic bust.
This means that individuals are going to lower their preference for present consumption versus future consumption.
By this logic, a higher interest rate stance is going to weaken the demand for goods and services.
https://mises.org/mises-wire/fable-economic-soft-landing
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