If you believe, as I do, that supply bottlenecks in the economy have mostly abated and that elevated inflation is primarily a function of high demand, then slowing down economic growth is absolutely necessary to bring inflation down to our 2 percent target. This slowing in activity is a sign that actions taken by the Federal Reserve this year to reduce inflation are working.
Let me take a few minutes to explain how. The Federal Reserve tightens monetary policy to reduce inflation primarily by raising short-term interest rates, which has the effect of boosting interest rates throughout the economy. Higher borrowing costs curtail spending and investment by households and businesses.