The Federal Reserve Bank had just annouced that it plans to

The Federal Reserve Bank had just annouced that it plans to raise interest rates three more times this year. At the same time, it has been noted that real wages are still not rasing, so wage stagation countries. Use analysis(aggregate supply/aggrefate demand? to explain why the Fed wishes to raise interest rate, do you think it is a good idea?

Solution

Federal Reserve wishes to raise the interest rate, because it will discourage the ugly spending and inflation will come down. With a decrease in inflation, the purchasing power of money will increase. As a result, the real value of wage will increase. The wages are sticky in nature as it is based upon the contract. So, the stagnation is the wage will continue in the short run, but its real value can be increased by increasing the interest rate. So, it is a good idea of the Federal Reserve to increase the interest rate.
In AD-AS model, when there is scope of AD overlapping the potential output level, then demand pull inflation sets in the economy. It will cause supply (SRAS) to shrink and move leftward. It will raise the price level. It will further decrease the real value of wages. Hence, Fed has decided to increase the interest rate and control the expansion of AD so that price level is in control and inflation rate is within the target so that the real value of wage will rise.