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Recession Is “Strong Medicine” of Global Inflation

With such an elevated inflation rate, the Fed insisted on the need to increase its benchmark-interest rate. The impression of a "strong medicine” can be seen from the large increase in the interest rate.

By
ARI KUNCORO
· 1 menit baca
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The Federal Reserve, the central bank of the United States, increased its benchmark-interest rate on 15 June 2022. The Fed is trying to control US inflation, which amounted to 8.6 percent in May, the highest since 1994. Many people are worried that the interest-rate hike is an overdose that could drag the US into a deeper recession; the problem is the production side of the world economy that has been disrupted by the Russian-Ukrainian war.

The standard recipe in reducing inflation is to "recess" the economy by lowering the demand side. The trick is to reduce the expansion of the money supply and increase the central bank's benchmark-interest rate or other instruments that can tighten liquidity.

Editor:
NASRULLAH NARA
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