Customer Quote by William Vickrey
“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
Source Academic paper: Monetary Policy and Supply‑Side Effects, 1975
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.