The word “inflation” causes people, who can remember the early 1980’s, to furrow their brow, look down and shake their head.  Those were the years of double-digit inflation.  Our government took several unsuccessful steps to curb inflation.  (Remember the WIN buttons for “Whip Inflation Now”?)  Inflation was high and scary – so scary that one man finally summoned the courage to stand up and intentionally throw this country into a recession.  His name was Paul Volcker, and he did the right thing as Chairman of the Fed.  Because we never want another intentional recession, we watch inflation very carefully now.

Economists quibble whether 2.5% is worrisome or not.  Core CPI over the last twelve months has been 2.9%.  As the Fed has become our sole protector from inflation, there can be little doubt that they will keep raising interest rates for the time being.

However, while increased interest rates do help to cool the economy and to control inflation, it also strengthens the dollar, which is already too strong.  If you are a manufacturer selling your products internationally, a stronger dollar will hurt your sales.

The burden of rising interest rates is carried by exporters and new home buyers.

Most Americans are pretty sanguine about rising interest rates, but be careful what you wish for . . .