Here's a write-up on why increasing interest rates may not effectively combat cost-push inflation:

_Cost-Push Inflation:_

- Caused by increased production costs, such as higher wages, raw materials, or supply chain disruptions.
- Leads to higher prices, as businesses pass on increased costs to consumers.

_Interest Rate Hikes:_

- Typically used to combat demand-pull inflation, where high demand drives up prices.
- Increases borrowing costs, reducing consumption and investment, and subsequently curbing demand.

_Why Interest Rate Hikes Won't Work for Cost-Push Inflation:_

- Doesn't address the root cause of inflation (increased production costs).
- May even exacerbate cost-push inflation by:
- Increasing borrowing costs for businesses, leading to higher production costs.
- Strengthening the currency, making imports cheaper, but also reducing demand for domestic products.
- Potentially leading to higher unemployment, further reducing demand.

_Alternative Solutions:_

- Addressing supply chain disruptions and improving productivity.
- Implementing policies to reduce production costs, such as subsidies or investments in technology.
- Monetary policies like quantitative easing or forward guidance to stabilize prices.

In summary, interest rate hikes are ineffective against cost-push inflation, as they don't address the root cause and may even worsen the situation. A more targeted approach is needed to tackle the specific drivers of cost-push inflation.