Only consumer debt keeps the economy growing. For reasons beyond comprehension, the Bank of England chooses this cliff-edge moment to announce it will raise interest rates, due to rising inflation. The Bank was set a 2% inflation target, devised in days when high employment triggered wage inflation. No such luck: despite record employment, wages are falling behind prices, with too many low-paid jobs. Price rises are due to the Brexit fall in the pound, inflating imports as the trade balance worsens. Raising interest rates now is leech-doctor medicine, upending indebted households and cutting national consumption.
Raising interest rates is the solution to inflation. We’ve got inflation but we must not raise interest rates?
OK, so the inflation is due to the fall in the £. What does raising sterling interest rates do? Raise the value of the £. What does raising interests do then? Reduces inflation.
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