Central banks heat up and cool down the economy by regulating the price of debt and the amount of money.
The central banks were late in raising interest rates and now have to correct the mistake in a painful way. How did this happen?
In the economy rattles.
Consumers’ money is dwindling. Real estate investors, startup companies and banks that have poorly hedged their risks are in trouble. Indebted states have to spend a large slice of their budget on interest costs.
The rise in interest rates can be considered a healthy phenomenon, but the suddenness and abruptness of the change will make dents in the economy.
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