Re:Federal Reserve raises rates by 0.75%
by jgust on Wednesday June 15, 2022 @02:53PM
(#31757588)
What's the ELI5 version of how to interpret this trend line?
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Re:Federal Reserve raises rates by 0.75%
by whimsicalism on Wednesday June 15, 2022 @02:57PM
(#31757660)
The basic Fisher equation of exchange is that
Velocity * Money Supply = Price Level (changes in this are inflation) * Economic Output
During early pandemic, velocity tanked because people were spending less so it was not a foregone conclusion that increasing the money supply as much as the Fed did would lead to inflationary changes in the price level.
Now, we are seeing velocity somewhat rebound while output is not increasing as much as we would expect and the Fed is doing little to scale back money supply.