# Why does the Dow Jones seem to like this week's interest rate increase? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [March 17, 2022, 5:49pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264 "2022-03-17T17:49:02Z")\ **Posts on this page:** 11\ **Page:** 1
**Author:** ![dolphinboy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dolphinboy/32/330_2.png) [@dolphinboy](https://boards.straightdope.com/u/dolphinboy)\ **Post date:** [March 17, 2022, 5:49pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/1 "2022-03-17T17:49:02Z")
The title says it all. I would think higher interest rates meant higher debt expenses for companies which translated into lower earnings. There must be someone that I’m missing here, or the market increase has absolutely nothing to do with interest rates going up. ---
**Author:** ![kenobi\_65](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kenobi_65/32/13178_2.png) [@kenobi\_65](https://boards.straightdope.com/u/kenobi_65)\ **Post date:** [March 17, 2022, 5:50pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/2 "2022-03-17T17:50:12Z")
Likely because it signals that the Fed is taking action to reduce the inflation which has been occurring for the better part of a year. ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [March 17, 2022, 6:13pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/3 "2022-03-17T18:13:55Z")
Lol, what you are missing is that the extra interest expense born by these companies ends up at financial institutions located at (checks notes), Wall Street! Of course they’re happy! 🙂 ---
**Author:** ![hajario](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hajario/32/171_2.png) [@hajario](https://boards.straightdope.com/u/hajario)\ **Post date:** [March 17, 2022, 8:52pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/4 "2022-03-17T20:52:26Z")
It could be that they were expecting a higher rate and that expectation was baked in. The actual rate was a pleasant surprise. ---
**Author:** ![kenobi\_65](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kenobi_65/32/13178_2.png) [@kenobi\_65](https://boards.straightdope.com/u/kenobi_65)\ **Post date:** [March 17, 2022, 8:59pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/5 "2022-03-17T20:59:46Z")
> [@hajario](#): > > It could be that they were expecting a higher rate and that expectation was baked in. Possibly, though, for the past few months, I’ve been reading from various sources that the general expectation was that this month, the Fed would implement the first of several quarter-point increases for 2022, which is exactly what happened. ---
**Author:** ![dolphinboy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dolphinboy/32/330_2.png) [@dolphinboy](https://boards.straightdope.com/u/dolphinboy)\ **Post date:** [March 17, 2022, 9:45pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/6 "2022-03-17T21:45:56Z")
Sure, but how does inflation hurt companies? I thought they turned their increased costs into increased prices in order to maintain their profits. ---
**Author:** ![kenobi\_65](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kenobi_65/32/13178_2.png) [@kenobi\_65](https://boards.straightdope.com/u/kenobi_65)\ **Post date:** [March 17, 2022, 9:52pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/7 "2022-03-17T21:52:06Z")
Yes, but that assumes that demand remains constant, and in an inflationary economy, that’s often not the case. When inflation is high, prices often rise more rapidly than do consumers’ incomes. In other words, inflation reduces consumers’ overall ability to make purchases, and this depresses demand. Even if a manufacturer doesn’t raise their prices any more than the increase in the cost of their inputs (that is, they don’t take advantage of inflation to increase their net profit per sale), they may still see that their sales decline, because fewer consumers can afford to buy. ---
**Author:** ![dolphinboy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dolphinboy/32/330_2.png) [@dolphinboy](https://boards.straightdope.com/u/dolphinboy)\ **Post date:** [March 17, 2022, 9:59pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/8 "2022-03-17T21:59:16Z")
That makes perfect sense. ---
**Author:** ![Roderick\_Femm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/roderick_femm/32/14875_2.png) [@Roderick\_Femm](https://boards.straightdope.com/u/Roderick_Femm)\ **Post date:** [March 17, 2022, 11:53pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/9 "2022-03-17T23:53:24Z")
Controlling inflation is in everyone’s interest. Remember that companies that sell stuff also have to buy stuff. If they buy stuff and then can’t sell their stuff at a price that makes a profit, that’s bad for them. If they have to lay off employees, that’s bad for the employees. When these kinds of things happen, their stock price goes down. So the Fed doing what it is supposed to be doing to control inflation is widely regarded as good for the economy. ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [March 18, 2022, 6:04am UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/10 "2022-03-18T06:04:08Z")
Shows that the Volker Fed lives on. In other words, the Fed takes inflation seriously and is finally starting to unwind the incontinence of quantitative easing ---
**Author:** ![Tim\_T-Bonham.net](https://avatars.discourse-cdn.com/v4/letter/t/46a35a/32.png) [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)\ **Post date:** [March 18, 2022, 12:34pm UTC](https://boards.straightdope.com/t/why-does-the-dow-jones-seem-to-like-this-weeks-interest-rate-increase/961264/11 "2022-03-18T12:34:42Z")
> [@Roderick\_Femm](#): > > Controlling inflation is in everyone’s interest … Controlling, but not ending. No inflation, or actual deflation, is a sign of a declining economy. Usually accompanied by higher unemployment, more small businesses closing, fewer business start-ups, etc. This action by the Fed was in line with what most expected; it shows that they are taking inflation seriously, but are not over-reacting. Reassures investors that the Fed has a steady hand on things. Also that the economy is starting to move again despite Covid.