Argument Overview
This disadvantage argues that if the federal government pursues significant fiscal redistribution and expansionary economic policy via the topic mechanisms then it would lead to the Federal Reserve raising interest rates to combat the real or perceived inflation that results from the action of the affirmative plan. The Federal Reserve has been raising interest rates to combat the current round of inflation, but the Fed signaled at the June meeting that inflation is cooling off and we are nearing the end of the rate hike cycle. A change in course would weaken an already fragile economy.
As the central bank of the United States, the Federal Reserve is guided by a “dual mandate” obligation which tasks it with simultaneously preserving price stability (low inflation) and maximum employment (low unemployment). The Federal Reserve uses monetary policy to pursue these goals. Rate hikes are an example of contractionary monetary policy that are designed to reduce overall aggregate demand throughout an economy. This, in turn, helps reduce inflationary pressures and bring an economy back to equilibrium; however, aggressive rate hikes can trigger a “hard landing” and bring about a recession if that Fed overshoots its target. The disadvantage argues that this would be the likely outcome if the Fed reverses course and continues down the path of raising interest rates.
For background reading on the mechanics of this argument, consider reviewing the following:
(Investopedia)
Monetary Policy: Meaning, Types, and Tools (Investopedia)
(Investopedia)
(Investopedia)