Given our opening statement about the misuse of credit - making the cost of borrowing too low and hiding the moral hazard of taking on debt, inflation was built into their policies. This is also the major cause of economic bubbles.

So what happens when inflation gets out of control? The standard response and one of several tools is to raise the cost of borrowing. By raising rates you make the borrower think smarter about the hazard of the loan especially if the market is contraction. This logical response harms a number of individuals and industries as unintended consequences. It destroys the housing industry: construction, real estate, etc. and the home owner. Suddenly your home is worth less and the number you can buy it shrinks because it is now outside their budget.

In the United States we have raised the interbank rate to 3.75% and will increase it in 2023 to 5-6%. Now add the usual 3% margin banks place on top of what they pay you have interest rates at 8 to 10%. And that is for the best customers, imagine the impact credit card rates?

The forecast for 2023 is the global interbank interest rates will stabilize around 4.25-4.5%. This is a world-wide number and what will happen in your country will be different.