“If the Fed raises interest rates from near Zero this year, the effect may result in higher inflation” –Paul Ebeling
Why? Because with increased lending rates, the Fed will increase the cost of housing, the cost of investing, the cost of automobiles and equipment, and the cost of student loans by hiking rates.
Raising rates will boost the price of food and drink and lift the cost of our cell phone and Internet use. Higher rates would typically increase your automobile-loan payments and the cost of borrowing money to fund domestic and global economic activities of small business and large US companies.
This theory is called the MFRIT Modern Federal Reserve Inflationary Theory.
It may be time to go beyond MMT Modern Monetary Theory and encourage The White House or Congress to change the rules of the game. If the Fed is going to artificially boost costs and inflation in the US, then executive action should be taken that would lower the impact for working families, small businesses, and those who make this country actually function on a daily basis. After seeing the rate hikes and the market crash of Y 2000 of $10-T of wealth being lost, there needs to be a new strategy
This is the reality
We are living in a new paradigm. This is not Ys 1998 or 1999, when rates went up to slow down the internet boom during the Clinton administration where eventually we had the worst stock crash in recent history.
Plus, every time the Fed raises lending rates, the cost of interest on our debt and the cost of running the US government goes up dramatically thus reducing available money to spend on infrastructure and salaries of government employees.
Further, other countries around the world can lend at lower rates than the Us and continue to stimulate their economies through smart lending and smart exporting.
So, all other countries could facility growing economies while the US goes into the recession and stagnation. Read: the interest rate hikes may beget unintentional discrimination on middle class and working families in the 21st Century. Hopefully, the Fed will find solutions to this problem.
Have a healthy, prosperous day, Keep the Faith!