The supply-side effect of a restrictive monetary policy is…
“The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure.”
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Restrictive monetary policy raises interest rates, increasing production costs and unintentionally fueling inflation, contrary to its intended effect.
In simple terms: High rates can cause inflation via cost pressures.
Balance policy tools to avoid counterproductive outcomes.
Themes
Mood
Type
When to use this quote
- central banking
- budget planning
- business investment
- pricing strategy
Key Concepts
Questions to Reflect On
- How can policymakers monitor cost‑push inflation?
- What alternatives exist to curb inflation without raising rates?
Policy may have delayed or uneven effects across sectors.