Why is inflation still high despite central bank interest rate increases?

Inflation is like a hot oven that won’t turn off, even if you add more heat, it still feels too warm.

Imagine you and your friend are running a lemonade stand. You both decide to raise the price of your lemonade because it’s super popular. That makes sense, more people want it, so you can charge more. But what if inflation is like another kid who also wants lemonade and keeps raising their prices too? Even if you and your friend try to slow things down by charging a bit less (like when the central bank raises interest rates), the other kid, inflation, just keeps going strong because there’s still lots of demand.

• People are still spending a lot: Even with higher prices, people might still buy things because they have jobs and money in their pockets.
• Some prices take time to change: Just like it takes time for your lemonade stand to cool down after the oven is turned off, some prices don’t adjust quickly, especially big things like rent or cars.

So even if the central bank tries to slow inflation by making borrowing more expensive (like turning down the oven), it might still feel warm for a while. Inflation is like a hot oven that won’t turn off, even if you add more heat, it still feels too warm.

Imagine you and your friend are running a lemonade stand. You both decide to raise the price of your lemonade because it’s super popular. That makes sense, more people want it, so you can charge more. But what if inflation is like another kid who also wants lemonade and keeps raising their prices too? Even if you and your friend try to slow things down by charging a bit less (like when the central bank raises interest rates), the other kid, inflation, just keeps going strong because there’s still lots of demand.