There are now clear indications that given stubbornly high inflation, the US Fed will be more aggressive in the intensity of its rate hikes. Inflation is on the rise, partly due to external factors such as the war in Ukraine and the continued covid shutdowns in China’s major manufacturing hubs. The US Fed influences employment and inflation levels primarily by using monetary policy tools to control the availability and cost of credit. Here, the Fed’s main tool is the federal funds rate, changes in which influence other interest rates – which, in turn, influence borrowing costs for households and businesses as well as broader financial conditions. wide. When interest rates rise, borrowing becomes more expensive; consumption demand is impacted and investments are postponed. All of this eventually drives down wages and other costs, which in turn keeps runaway inflation in check. Foreign Portfolio Investors (REITs) tend to borrow from the US at lower interest rates in dollars and invest that money in bonds/stocks from countries like India in rupees to earn a rate of return. higher interest.