The perceived wisdom that raising interests rates has got to be questioned in the light of another hump in the inflation rate.
All the reports on the TV news today suggest that the rise in inflation is down to a rise in pricse of essential food items and fuel, not consumer goods. Whilst raising interest rates (or even taxes) might stop people buying a new DVD player, it will not stop people buying essentials like bread, milk and petrol, which are the key causes for the rise in inflation this month.
So given that the economy is rather up the creek and we appear to be losing the proverbial paddle, is the Bank of England right to believe that a delay in further interest rate cuts will actually do anything to halt inflation rising, more likely a long delay before a further rate cut will actially exacerbate the problems in the economy at the moment.
All the reports on the TV news today suggest that the rise in inflation is down to a rise in pricse of essential food items and fuel, not consumer goods. Whilst raising interest rates (or even taxes) might stop people buying a new DVD player, it will not stop people buying essentials like bread, milk and petrol, which are the key causes for the rise in inflation this month.
So given that the economy is rather up the creek and we appear to be losing the proverbial paddle, is the Bank of England right to believe that a delay in further interest rate cuts will actually do anything to halt inflation rising, more likely a long delay before a further rate cut will actially exacerbate the problems in the economy at the moment.
5 comments:
I would usually agree, but the 'experts' reckon that reducing interest rates, can lead to major financial disasters like sub-prime. This was supposedly a result of cutting the interest rates to regain confidence after the 9/11 attacks.
Concern about inflation
what about inflation and women ???
Given that women have still not got equal pay
When will Lib Dem,Labour, Tory councils actually implement equal pay
In Birmingham the council is bringing in equal pay by cutting mens pay
Completely irrelevent to the story, but you've made your party political point scoring point.
Another interest rate cut is completely unjustified with CPI and RPI both creeping up this month.
But isn't the point that with inflation going up on essential items like food, things that people have no coice about, that this is acting as a break on consumer spending anyway ?
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