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Ol’ Wisco | You re exactly right. The raise in rates is an attempt to temper demand for capital. It’s a balancing act by the fed to see where the “soft” spot is between cost of capital/supply and demand. If the demand is so high that even the raises we ve seen aren’t enough? That’s the question no one can answer.
It’s also a function of the risk free rate. At some point investors will see enough yield in risk free investments (bonds, bills, etc.) to move capital from the risky assets which are more easily leveraged into credit to less risky govt investments which are harder to leverage into credit.
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Can higher interests actually create inflation?
