The Fed follows an old myth while gaging interventions on the wrong thing. The Phillips principal relates inflation with high employment rates. A last century concept, inflation and employment may be associated, but is there a cause and effect relation? Fed uses an old theory that does not work today, hopping to check inflation with unemployment.
Any business with a tight budget and narrow margin that’s nearly all of them, must raise prices when faced with lower volume and increased cost - not even a question. Increased interest rates most certainly add to business cost and curtail hesitant consumer spending.
Many former employees will never return to work. Reluctant customers add to their credit cards to cover increased cost of energy and non-discretionary expenses with even higher interest. What Liquidity there is, seeks, equities, T bills, and gold to hedge inflation.
Only salvation, will be a competitive increase in production of goods and services. Increase turnover / velocity. Facilitate an inexpensive, competitive supply of energy. Lower interest rates to a desirable sustainable rate and keep hands off. The M1 is down. With increased productivity, velocity will soar.
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