BlackRock’s bond guru Rick Rieder says the Fed’s favorite inflation firefighting strategy is failing—‘the private sector has become a creditor now’

(Credit: Christopher Goodney—Bloomberg/Getty Images)

This is a story about how interest rate hikes are supposed to work, and why they might not be working as intended right now—at least according to one of the bond market’s biggest names. 

Typically, when inflation becomes an issue in the economy, the Federal Reserve raises interest rates to fight it, effectively increasing borrowing costs for businesses and consumers nationwide. The goal is to stabilize prices by incentivizing more saving and less spending, which slows economic activity.