One more example.
The Fed lowers interest rates below inflation. This action is inflationary.
Inflation rises.
Long-term interest rates rise to reflect a higher inflation premium.
Borrowers/investors borrow less.
Consumers buy less because of loss of purchasing power due to rising inflation and because of higher borrrowing costs.
The Fed is in a box. The markets win.
More on https://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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