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pattydo t1_it7n7ki wrote

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

The relationship between inflation and interest rates really isn't that strong anymore. Largely because the link between unemployment and inflation isn't very strong anymore either.

The fed doesn't even think raising interest rates will do much for inflation.

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LeroyoJenkins t1_it7p60t wrote

It depends. When inflation is cross-border, and caused by supply shocks, raising interest rates in a single country isn't enough because consumption is global (such as as with energy). When it is localized, it is strongly tied to local consumption and therefore strongly impacted by interested rates.

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pattydo t1_it7qukw wrote

Even every country raising interest rates isn't going to do much for inflation. It's not the 1980s anymore, the economy is changing. Many central banks realize it (like the US), but are raising interest rates anyway because that's the only tool they have.

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