GA said whenever he sees signs of inflation , he will fight it fiercely by rate hike , and which will of course accelerate the inflation. Because you monthly payment on your mortgage will go up, you loan payment for your car will go up. The price of commodity will go up , because the cost of money goes up !!!! So , AG is using inflation to fight inflation, and it is a new invention.
Your mortgage payment will go up only if you have an adjustable rate mortgage. Ditto for your car loan payment.
I don't see how you come up with your assertion that raising interest rates will cause rising commodity prices and inflation. An uptick in interest rates will cause people waiting for even lower rates to hurry up and buy before rates go up further and can therefore cause a very short term increase in demand, but this rapidly reverses itself.
If interest rates go up then it becomes more expensive to take out a new mortgage or a car loan and so less money is borrowed and less houses and cars are bought. This decrease in demand causes the cost of existing houses and cars to decline, and the rates of new housing starts and new autos being built will decline. The builders of both of these items order fewer parts and materials from their suppliers, and this decrease in demand causes these commodities (wood, steel, copper, aluminum, etc) to drop. Increased interest rates also make it less desirable to hold non-equity, non-interest-paying investments such as gold. |
