What will higher interest rates produce?

Inflation caused by an easy money policy leads to a cure of inflation with a tighter monetary policy.

What’s the expectation?

Higher interest rates will cool spending and reduce higher prices (reduce more inflation).

Why?

*10% of the US population controls 89% of all investment assets and 44% of all real estate. Higher rates hurt them most by hitting them in the investment ‘ass’ets. They’ve already lost over $7 Trillion this year. A dear friend of mine shared he will not take delivery of his new Porsche. This is a longer-term game but it will have a psychological effect.

*90% of the US population controls 11% of all investment assets and 56% of all real estate. Higher rates hurt them more in the shorter term borrowing on credit cards, equity lines, car loans, etc. They’ll start to alter their behavior, drive less, take fewer vacations and buy less and that will start to slow the economy. Longer-term they’ll start to feel their real estate values decline (some) and they'll notice their retirement accounts stopped going up this quarter.

There is no guarantee this works, but higher rates affect the entire 100% of our population, but it will take time.

Then, monetary policy will ease again, rates will go lower again, and we start a whole new cycle.

IMO - the big wildcard here is OIL, it has the same 100% impact as higher rates. *Federal Reserve Z1-Q4-2021