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[–] CanIHazPhD ago
Inflation is quite low right now (less than 2%) and the ecnonomy is healthy, why would they want to raise the interest rates to more than double the current level?
https://tradingeconomics.com/united-states/inflation-cpi
[–] ForTheUltimate ago
That's another question. If it stays so forever, then there's no proof or disproof.
However, if inflation rises so that the fed can either let it happen or raise interest rates, then we'll see. One theory is they'll rather let it rise than deal with recession.
Either-way my hypothesis is disprovable, it's just difficult with empiricism when the test is not controlled or repeatable. That's why I prefer rational explanations that build on micro-economics.
[–] CanIHazPhD ago
But the problem with both approaches is that there are so many cofounding factors that there is no way to tell. And there are already good explanations to why high interest rates would lead to recession (deincentivizes investment and R&D, strong dollar makes people buy foreign instead of American, etc.) so separating that from malinvestments would be quite hard too.