The presumption that the Fed raising short-term rates reduces inflation is predicated on the belief that higher rates reduce demand and investment. But what if higher rates don’t reduce demand and investment because the demand for intelligence and energy is unaffected by higher rates because winning the race for super intelligence has a near infinite ROI and the demand for compute will remain incalculable. Why won’t higher rates at this unique moment in history therefore lead to more inflation as interest costs are embedded in everything? And the problem is compounded as the more the Fed raises rates, the more inflation we will have and the more the Fed will need to raise rates further and so on. But what if the old models don’t apply to the current paradigm and the Fed is wrong? I think the Fed might have just made a mistake. Am I right or am I wrong?

It’s an interesting point. Higher rates lead to higher government deficits and higher money printing (inflation). Lower rates would help balance the budget. We want massive growth, and inflation that does not exceed it. But if you have high growth you can tolerate some inflation. The main thing to curtail is money printing that exceeds economic growth. And the main thing to max is economic growth.