So this with reference to the US market, Fed raising rates to tame inflation AND raise the unemployment rate.
I understand raising interest rates makes borrowing more expensive, encourages savings and makes lending harder, hence discouraging inflation. Cool
But they keep saying that should also make unemployment go up. This part I don't get; if it is costlier to live because of inflation, people will come to work and unemployment stays down. For unemployment to go up, I would assume ( based on these general logics ) that once inflation cools, the unemployment rate may increase as people who have saved up enough can be unemployed, or whatever reason just be unemployed.
Finally, I assume these rates have other things factored in- like the fact the new young people join the workforce every year. And, that since student loan payments were paused, and the average American doesn't just reduce spending, but increases their credit usage more ( when inflation strikes )
My thinking being, Jpow isn't going to unemployment go down because anyone who can afford to be unemployed already is, and no one else will be able to for a while. He said he would keep hiking till he saw uptick in unemployment, didn't he?
Am I right in assuming that any uptick in unemployment will come at least a few months after inflation has seriously cooled?
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