To see this working, head to your live site.

Raising interest rates, good or bad?

in General Discussion

Should central banks continue to raise interest rates to combat inflation, even at the risk of triggering a recession?

2 comments

2 Comments

Commenting on this post isn't available anymore. Contact the site owner for more info.

manya raheja

Apr 13

Central banks may need to raise interest rates to reduce inflation, as higher rates discourage borrowing and spending, which can help lower aggregate demand and combat inflation. However, this can also reduce investment and consumer confidence, potentially leading to lower economic growth and higher unemployment. Moreover, lower aggregate demand could lead to a recession if the economy is working with spare capacity, where the real GDP would be falling without a fall in the price level. In conclusion, it depends on the extent of spare capacity in the economy.

shanaya oberoi

Apr 13

Replying to

That’s a solid take — it’s really about balance. If inflation’s running hot and expectations are unanchored, rate hikes make sense to cool things down. But if there’s already spare capacity and weak growth, aggressive tightening can do more harm than good. Sometimes the medicine cures the fever but breaks the bones, y’know?