Why does Fed raise rates in response to supply-side caused inflation?
Why does Fed raise rates in response to supply-side caused inflation?
I recently read an article about OPEC, and how oil prices will likely rise for the next year or two. The article said this will cause a significant uptick in inflation indicators, so the Fed will likely raise rates.
I can understand raising rates in response to monetary inflation, but it doesn't make much sense to me to raise rates in response to supply-side shocks. It also seems cruel since the goal seems to be to raise rates so more people become unemployed or underemployed so that can't afford to buy gas.
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