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LeroyoJenkins t1_it7q3o3 wrote

Reply to comment by hacksoncode in [OC] Inflation rate and nominal interest rate by giteam

No, even if supply is the problem, high interest rates will decrease consumption and eventually bring it to the level of supply.

Naturally, that might also cause a decrease in the economic activity causing a recession.

The problem is that fixing inflation hurts, and people tend to have an aversion to pain, and to politicians who cause it.

And none of that matters to my point: inflation is backwards looking, target interest rates are forward looking. The rest is pedantism.

Anyway, no point in arguing economics on Reddit...

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kawhi_2020 t1_it7tbl2 wrote

What do you mean "might"? Lowering consumption is lowering economic activity.

That is the point.

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LeroyoJenkins t1_it7w2oj wrote

Might is referring to the recession. Depending on the circumstances, you might just slow the growth of consumption allowing supply to catch up, without causing a recession.

It all depends on how drastic things are and what is the roadblock.

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