The Federal Reserve has unsettled world stock markets by signaling a blunder in monetary policy. Raising interest rates won’t reduce inflation. If anything, raising interest rates will make inflation worse.
This isn’t a conventional business cycle where excess credit leads to heightened demand for goods and services. It’s a supply-side crisis. Interest rate policy is the wrong tool.
There’s a simple way to stop inflation. The US government should stop its multi-trillion-dollar subsidy for personal consumption and instead support investment in productive capacity.