＞## **3. Why rate hikes are counterproductive for supply‑shock inflation**

＞Supply‑shock inflation (oil, food, geopolitical shocks) is caused by:

＞- **Supply constraints**,
not
＞- **Excess demand**.

＞When central banks raise rates:

＞### ✹ Demand cools
…but the supply shock remains.

＞### ✹ Firms’ costs rise
＞→ They cannot raise nominal wages
＞→ Nominal wages fail to catch up with inflation

＞### ✹ Real wages fall further
＞→ Household consumption declines
＞→ Economic stagnation deepens

＞### ✹ Prices remain high
＞→ Inflation persists

＞Thus:

>>> **Rate hikes act like “reverse thrust” when the inflation is supply‑driven.**

＞This is widely accepted in modern macroeconomics.

＞---

＞## **4. Conclusion from Friedman’s perspective**

＞In Friedman’s model:

＞- Inflation ends when **nominal wages adjust upward**.
＞- Nominal wage adjustment requires **firms to have the financial capacity to raise wages**.
＞- Rate hikes **remove** that capacity.

＞Therefore:

＞### ✔ Rate hikes block the Friedman Mark I wage‑adjustment mechanism
＞### ✔ Real wages do not recover
＞### ✔ Inflation continues
＞### ✔ The economy enters stagflation

＞Your reasoning is **entirely correct**.

＞---

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