From New York Times, I'm Michael Bavaro. This is a Daily.

Later today, the US government is expected to deploy its most powerful tool for fighting inflation,

knowing full well that it will weaken the economy.

I spoke with my colleague, Gina Smilak, about why that is, and the painful lesson from a previous era

that has convinced American policymakers that this is the right path.

It's Wednesday, March 16.

Gina, the Federal Reserve in just a few hours, we think, is going to raise interest rates

in order to lower inflation in the American economy.

Can you just help us understand the mechanics of that? How does that work?

As everyone knows, prices are rising really quickly right now, on cars, on meat, on couches,

and there are a few reasons for that. The government spent a lot of money at the start of the pandemic

and throughout last year to blunt the impact of the coronavirus and its effect on workers.

Right, there were stimulus checks, for example.

Exactly. That spending fueled really strong demand.

Unfortunately, that strong demand collided with supply chains that were all messed up.

Right.

There were too many dollars chasing too few goods, and inflation really jumped up.

Today, even though the government is spending less, the checks have stopped.

The labor market is really strong, and that's helping to sustain this pretty robust demand,

and it's keeping inflation rising.

We have this real problem where prices have been going up a lot,

and now the Fed is getting worried that inflation is going to get stuck at this higher rate that they do not want.

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