Can someone explain why raising interest rates in recession helps?

You can't afford to buy anything on time (including w Credit Cars), so buying slows (demand). As demand falls, prices fall.

Because it discourages people from borrowing money, thereby reducing the amount of dollars in circulation. Only the idiots running our country didn't see this shite show coming.

It doesn’t help. It’s meant to curb inflation, not help business.

It's not really necessary. Dems passed The Inflation Reduction Act so we can expect inflation to go way down.

quote:

---

Can someone explain why raising interest rates in recession helps?

---

That's the wrong way to ask it. Rates are usually raised in good economic times and lowered in bad ones. Raising/Lowering rates is just a fancy way of saying "removing/adding money to the economy".

The reason the question isn't good is because our rates being so low for so long, along with the Fed buying lots of debt, and then the federal government dropping ~$2T in cash into the economy within a 4-month period (stimmy checks, not even including PPP or expanding welfare benefits here) created a perfect storm for high inflation. Leaving rates low would have risked a likely hyperinflation scenario and then a near-total economic collapse.

"Inflation", among economists, is a measure of the value of the Dollar and that value is primarily determined by how many of them there are in the economy. In this way, the USD is a good just like a bag of flour or a mint, original edition of Action Comics #1. The more you have of a good, the less it costs because it becomes easier to get.

So the primary problem we have been facing is a metric frickton of Dollars in the market has created a shitload of inflation. The Fed had to decide between doing nothing and risking another Great Depression or raise rates and risk a likely Stagflation scenario. They chose the latter (it's like having to choose between losing two fingers or losing a whole arm, either way you're still losing).

Raising rates and ending the purchasing of securities drains money out of the economy, thus making the remaining money more valuable. Once the FedFund reaches ~3.4 at the end of this year, they'll re-evaluate on whether to pause on raising rates, and how long, before going for their 2023 goal of 3.8%.

Theory is to reduce demand. Most people borrow for homes, vehicles etc. The higher interest diminishes that and with the reduced demand should bring down prices. Econ 101 but its just not that simple especially with an administration that seems to be countering that lever on multiple fronts.

Inflation can lead to a recession if it is sustained at a high level for an extended period of time. Inflation caused recessions are a product of an inflated money supply. Inflated money supplies are corrected in general by shrinking the supply and access to money through increased rates of interest by making it more difficult to borrow money.

It doesnt help anything but put pressure on buying habits.....when you quit buying shite, prices fall.....and the economy goes to lovely shite.

This is Joe Bidens plan of economic excellence! What a dumb man!

Austrian Economics states that savings are needed for a productive economy. Interest rates help with that.