Federal Reserve Chair Jerome Powell warned us. The Fed will continue to fight inflation. And it’s going to be a painful battle. Powell implied in a recent speech that interest rates won’t come down until inflation falls to a reasonable level. This is an admirable goal. But economic pain is a side effect.
Higher interest rates make it more difficult for businesses to expand. This leads to fewer jobs. Many retailers and other low-margin businesses rely on credit. Higher rates make it difficult to continue operating. That means more layoffs. Fewer jobs and more layoffs means higher unemployment.
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