The Fed is making a bet. Perhaps the biggest bet in the world.

Many people wonder what the Fed does and why it does it. And what happens if the Fed makes the wrong move.

As you know, the Fed has been raising short-term interest rates. For about two years, it has pushed the interest rates upward. For the moment it has stopped pushing up rates.

Central banks around the world have been raising interest rates. Some more, some less.

Why is the Fed doing this?

It is trying to slow down inflation. It sees inflation in various corners of the economy. It knows inflation is ruinous. The Fed may be to blame for some or all of the inflation. It wants to stop or slow it.

And therein lies the bet. The massive bet.

The Fed has been raising rates. The higher rates have helped put the brakes on the economy. Higher rates often do that. They raise the cost of doing business. At the higher cost, fewer people do business.