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Confused how does raising interest lower inflation.

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Posted: #1

Not a finance expert.

Not sure how this procedure from the feds works.

Somehow raising the rate lowers the price of diesel groceries etc... ????

 

 
 
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Posted: #2

@nature1970

 

 Inflation is fueled by consumer demand. If people spend too much, then prices for goods and services go up. Raising interest rates should diminish spending. Lower prices should then follow.  It's like in sports betting, if too many bets are on the Celtics, the price goes up.

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