In the context of high inflation, the effect of interest rate hikes on curbing excess liquidity is very weak. Moreover, interest rate hikes directly lead to an increase in the cost of funds (interest rates are the price of capital) and will drive up costs across all industries. This could potentially lead to price increases in products and services across all sectors, ultimately possibly continuing to push up the inflation rate. (While to some extent reducing liquidity,) at the same time, interest rate hikes will directly increase the potential incentive for overseas funds to enter China's financial system to speculate on RMB appreciation and earn interest income simultaneously. This is equivalent to encouraging the influx of hot money, worsening the excess liquidity situation.