Interest rate hikes lead to rising costs and inflation, study finds.
The article explores how changes in interest rates affect prices and inflation in the economy. By using a business cycle model, the researchers show that when interest rates go up, real costs and inflation also increase. This is because higher interest rates lead to higher production costs, which are then passed on to consumers in the form of higher prices. This finding supports the idea that changes in interest rates can have a significant impact on the overall economy.