Almost everything the Fed does is counterintuitive to me (but what do I know, just a retired attorney.)

To spend on cars, houses, vacations (though mortgages are influenced by some other factors, too), etc. Businesses also have to reel in spending. So, there is less demand. If supply stays constant, or increases, prices will go down because suppliers want to attract customers, to sell their stuff.

For example, I saw a real estate newsletter that said someone who had to borrow and could afford a million dollar house earlier this year now can afford only $800000. So, that should slow the increase in housing prices and maybe cause a drop.

Cheap money means more borrowing and more spending. That's fine if there are plenty of goods and services available, but right now that's not the case.

Have you noticed how empty car dealership lots are? Your average GM, Ford or Chrysler dealer normally would have dozens of new cars and trucks on their lots, several of each model in different colors and trim levels, etc. Some dealers lots are pretty much empty.

These days, the only full lots are at used car stores, like CarMax, etc. because the used car market does not depend on computer chips from Taiwan (and other items in short supply) to install in new vehicles, though inventory is tightening because people aren't trading in their cars because they can't get new ones!

So in that one sleeve of the economy alone, you can clearly see inflation in action. People have money to spend, but there are not enough goods to go around.

So things become more expensive. The laws of supply and demand in action.

By raising the Prime Rate, the Federal Reserve Board hopes to trim back demand so prices will fall. That's all there is to it.

bringing inflation way down. The problem at the time is that it also brought on a double-dip recession (which has the effect of reducing inflation or even causing deflation).

It's just about impossible to bring down inflation without severely slowing the economy, and that's the problem now.