So besides hurting Trump, GDP and Main Street what are the benefits to raising interest rates at this time?
“The historically low interests rate we have now will not cause cost push inflation - they can’t.”
It finally dawned on me that you think that the inflation of the 1970s was caused by wage demands, a wage-push inflation, and of course it wasn’t.
It was a classic monetary inflation caused by an excessive growth of dollars after Nixon abrogated the Bretton Woods agreement in 1971 and broke the dollar’s last link with gold.
That inflation ended when Paul Volcker choked off credit creation with a 20% Fed funds rate, and Ronald Reagan slashed regulations that had been strangling economic growth.
Inflation is a monetary phenomenon, it is caused by a growth of the money supply that exceeds the economy’s growth rate.
High interest rates don’t cause inflation, and low interest rates don’t prevent it.
The inflation of the 1970s began with interest rates at around 4%. The double digit interest rates at the end of the ‘70s were a response to inflation, not the cause of it. Bond investors, the bond vigilantes, were demanding a return higher than the inflation rate.