Sour spillover of soaring rates

KUALA LUMPUR — Some have asked why I seem to be fixated on the issue of the Federal Reserve (the Fed, America's central bank) holding on to an approximately 5 percent interest rate (with which it lends short-term, often overnight, to major financial institutions) and hesitating about gradually lowering the rate. The Fed's admittedly very public reasoning for doing so has been its continuing mission to suppress what it considers to be overly high inflation in America. I explained in detail the historical contexts as to why the Fed acquired such a habitual reaction to high inflation, which it feels to be deleterious macroscopically to the American economy and microscopically to American consumers' interests.

To be more precise, the Fed is not totally averse to inflation. It acknowledges the positive role of inflation in providing motivation for businesses to grow. After all, merchants would be more willing to expand their businesses if they could charge ever higher prices for the goods and services that they provide. Of course, conversely, there is the low-cost business model, but that is perhaps more a temporary business tactic to corner the market, and once a monopoly is achieved, the business concerned would be tempted to raise prices — hence the need for anti-trust or counter-monopoly regulatory measures by relevant authorities.