Well, I don't see a common sense explanation as to why the rate of increase should decrease either. We could also say, "Eventually, the rate of increase will go down anyway, in the absence of any action from the fed."
I don't understand the entire system either, but one obvious effect is that there will be much less cash-out refinancing or flipping, which means at least that source of cash and the associated demand will get smaller. And judging how many people I know around town who have been treating their houses like ATMs, it's not a small effect.
> And judging how many people I know around town who have been treating their houses like ATMs, it's not a small effect.
This is true, this is at least appealing to common sense. But I don't see how that excess cash was going into spending more on food and gas.
If I run a supermarket and raise prices, and people like lettuce, if they keep buying the lettuce, because $3.75 lettuce is still worth it compared to $2.00 lettuce, well, CPI can increase a lot, and demand appears to be inelastic, and interest rate increases did nothing to reverse CPI.
