How does raising the interest rate when inflation rise supposed to help the people?
613289
it seems good to people who make financially investments.  You will notice that return on mutual funds are doing good, 401K etc.  The interest rate to borrow money is higher  now and the return on investing your money is higher which yields a win/win.
642142
yes, minimum wage need's to increase about 70% to 80%\nat least.(i noticed other's are worried about the effect it would have on, inflation. Borrowing money causes inflation, and other thing's...etc. so what is their point exactly\n\nIt's incrediable and scary, that so many people are forced into poverty wages.\n\nIt's is happening in every country (wages not keeping pace with inflation and stealth tax's) etc
1185458
On a net basis, no one.  In real terms, higher interest rates are a result of inflation which is an asset transfer usually from the poor to the rich.  However, there can be no profit if rates rise and no real transfer.\n\nNow, there are individuals and organizations who personally benefit and others who lose.  On average, everything is neutral.  Anyone holding cash, variable rate instruments or short long dated fixed rate instruments is ahead.  Anyone fully invested, holding fixed rate instruments or short floating rate securities is losing.  Commodity prices tend to fall as rates rise, existing owners tend to lose, but consumers then buy things at lower costs and win an equal amount (or approximately).
492698
First the term "Inflation" is generally the difference expressed as a percentage of the increase in value of everything except the currency of a country. The reverse to this it takes more money to buy anything.\n\nThe reason that governments go to lengths to reduce the rate of inflation of a country to as low as possible is that should inflation increase then an economic spiral starts with the population buying less then industry must respond by shedding jobs and investing less. This in turn affects investors and they reduce there exposure by selling their investments then if unchecked inflation rises, the spiral goes around again and again.\n\nThis spiral starts by producing what is called a recession and then as inflation increases you enter an economic depression which puts stress,poverty and starvation on the population and the weakest are the most affected.\n\nWhen inflation is run away or "rampant" either a turn around by extremely conservative measures and years of recovery or an injection of funds by neighboring states to bring the value of the currency back to the value of everything else in the country at the cost of massive debt.\n\nGetting back to high inflation, if left for too long becomes what is called hyperinflation then strange things like you wait half a day in a line to just get a cabbage or need a wheelbarrow of money just to buy a loaf of bread and all of a sudden a new currency printed to manage the old. This aggravates the general population so much and generally leads to someone getting the blame (government), then civil instability followed by violence and revolt.
392853
The interest rate on 10-year Treasuries is now 50 basis points higher than it stood at the start of the year. This rise coincided with a run-up in many commodity prices.\n\nThe market is concerned about incipient inflation but has confidence (at least no less than a month ago) that the Fed will succeed in eventually getting that inflation under control. The argument is that the Fed impacts the economy primarily through its effect on long-term real interest rates, so that the Fed will somehow have to get long-term real interest rates to rise in order to slow down the economy sufficiently to offset the incipient inflation.\n\nOver the past couple of years a few culprits have been identified as causing low long-term yields including foreign central banks managing their currencies, China & Japan, oil exporters not spending their windfall, Saudi Arabia & Russia, and pension funds moving out of stocks and into bonds to better match their long term liabilities.\n\nWith China slowly moving to a floating exchange regime, Japan ending its quantitative easing, the collapse of many middle eastern stock markets, and pension funds possibly completing their asset reallocation, current long bonds may be reflecting a drying up of demand\n\nAs the housing market continues to weaken it will have serious ramifications for the overall US economy. "The collapse of the housing bubble will throw the economy into a recession, and quite likely a severe recession. A turn in the housing market is central to our economy with a downturn in housing meaning more than 1.3 million lost jobs, bumping up the national unemployment rate by 1 percent and the unemployment rate in house-mad California by 2 percent. Those numbers don't include likely job cuts in housing-dependent businesses, such as mortgage banking, furniture and building materials. A bubble burst would mean the loss of 5 million to 6.3 million jobs. \n\nThe housing run-up has financed consumer spending, creating more than $5 trillion in bubble wealth. Consumers have used "cash-out" mortgages to pay for everything from new kitchens to college tuition. \n\nTo answer your question Yes the Federal reserve acted too late to slow current inflation and the 2007 recession.
870729
Depends on the business I guess. Your second question affects the first. So I'll try to answer that first. An increase in interest rates usually drives up the value (strength) of the currency. The higher the interest rate, the more foreign money and banks themselves invest in that currency driving up its value due to supply and demand laws.\nIf they are an exporter, then that is bad news as it becomes dearer for customers abroad to buy their goods and so they lose business. For importers the opposite applies it being cheaper for customers here to buy imported goods due to the strength of the currency which buys you more(more bang foryour buck).\nRemember though that if, as most companies have to, that they have to borrow money to invest, then higher rates are obviously a disincentive. However higher rates keep down inflation which is of course is a good thing. You are right to be confused as there is no single, easy solution.Otherwise governments would just keep raising rates or freezing them. Like all markets,balance must be maintained.
1124546
federal reserve rates affect all interest rates, and these are changed due to inflation and other reasons.  the fed "loans" money to other private banks at certain rates and the banks to make money have to charge over those rates.
1116586
If higher interest rates contribute to inflation then the Federal Reserve so have it wrong!!\n\nMost inflation is believed to come from an over active economy with too much money chasing too few goods. By  raising the cost of borrowing money, it reduces the amount of money people have to spend on more stuff. That slows down the economy. \n\nMost businesses don't rely on borrowed money to stay in business. They typically used borrowed money to expand their business or acquire other businesses.
503501
Assuming that the matter concerned remains the same (e.g. a coke), inflation essentially means that its price has increased over time (e.g. from $1 to $1.25). It can be caused by deflation of currency (e.g. Brazil), economy growth (price driven up when demand > supply) etc.\n\nThe impact of inflation to economy is immense and is hard to be explained in this forum. Suffice to say is that it is an indicator closely monitored by most governments.
447309
An expansionary monetary policy is one in which interest rates are going down. This has the effect of expanding the supply of money, since money is easier to get. A tightening of the money supply is when interest rates rise, a situation we've been in lately. When interest rates are high, this will increase your monthly mortgage payment on your house. When interest rates are low (during a time of expansionary monetary policy), your monthly mortage payment for your house will be lower. In the past, when interest rates have risen, we've seen the price of houses fall a bit so that buyers could afford them. However, we haven't seen the price of houses go down lately, even though interest rates have been rising.\n\nThe Federal Reserve Bank of the US formulates monetary policy and can effect interest rates. It tries to fight inflation by raising interest rates, and tries to perk up the economy by lowering interest rates. Home buyers are affected by interest rates because they borrow money (get a mortage) to purchase a house.
515952
Well, their action last week "hurt" the economy -- they're completely aware of that, and did it on purpose.\n\nThe Fed raised interest rates with the specific purpose in mind of slowing economic growth ("hurting" the economy).  They did so because they feel that too much economic growth can cause inflation, which they consider worse than slow economic growth.  Higher interest rates means it's more difficult and more expensive to borrow money, both for businesses and consumers.  That means less businesses will borrow money so they can grow, and less consumers will borrow money to buy things, slowing both capital investment and consumer spending -- and slowing the economy.\n\nTheir policies over the last 20 years or so have led to a more stable US economy than in the past, with less wild swings of growth, inflation, recession, etc.  We still have ups and downs, and the economy can still be affected by major events such as 9/11 or stock market crashes -- but not as much as in the years before the Fed took such an active role.\n\nSo even though their action of raising interest rates was designed to "hurt" the economy in the short term, over the long term their policies have resulted in a more stable US economy that is generally a benefit to both businesses and consumers.
785998
False.  Inflation decreases your purchasing power.  And it also decreases the value of your debt.
74344
They are deflationary to combat inflation
1130342
The U.S. economy has been climbing since the 9-11 incident. The interest rates are rising again so it is apparent that the government is trying to slow down spending. This is to help prevent inflation and gets some good money into Uncle Sam's pocket. The economy will continue on it's current course so long as people keep spending. That's the fuel that runs the engine, it's not the money but the actual trasaction of the money from one person to another.
288350
Yes. Very good - since I-Bonds are pegged to inflation - so the interest rate will rise or fally with inflation/deflation. IBonds protect you if you think inflation will occur.
1095731
No! At least on the Depression, the main worry of economists currently is that the growth in the US economy is so substantial that the value of our money is increasing, so the Fed is raising interest rates to hurt the economy and to devalue the dollar so that the dollar doesn't increase in value, which could lead to a small drop in the long term value of the dollar. Which is why we don't need the Fed, who should have to ride in short buses instead of limos.
690493
When the reserve purchases T-Bills, it increases the amount of money on the market, possibly causing inflation to rise and interest rates to fall. If the reserve is doing its job right, there would be no inflation, but deflation would be prevented.