Hello!
I would really appreciate if someone can explain why people say that the Fed 'has to raise' interest rates at some point in time. I'm interested in economic explanation, that is, the mechanism that makes the raise a necessary step.
On the one hand, a raise in interest rates decreases the investment which in turn yields lower income for the economy. On the other hand, a raise in interest rates decreases inflation and creates a monetary policy tool for the future when the decrease in the interest rate will be necessary. But is that it? Or, perhaps, there is another reason for why an increase in interest rates could be beneficial.
Thank you!