When the Fed stops raising rates, then the dollar will stumble and fall. This will increase domestic inflation significantly (as is usual when the Fed stops raising rates, paradoxically enough).The paradox
When the Fed thinks it has inflation under control, it stops raising interest rates. Makes sense, right? Low interest rates keep people spending rather than saving which is "good for the economy." With "easy money" people have more dollars available so they can pay more dollars for goods and services. This leads to rising real estate prices, stock prices, etc. More dollars for the same item equals "inflation."
But we don't want too much of a good thing because inflation is a bad thing. By raising interest rates, there is less "easy money" so there should not be so many dollars available to bid up prices. Theoretically, there are fewer borrowed dollars to use to spend to bid up prices or to spend without much concern for value-pricing.
More importantly, though, the US dollar weakens as the interest rate increases stop. If interest rates stop going up, people are less interested in US dollar assets because they will look elsewhere for better yields on their investments, which in turn lead to a weakening US dollar. Then imported goods - everything at Wal-Mart, IKEA and a lot of grocery store items become much more expensive.
Omygawd! We have inflation again/still.
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