Global energy prices are pushing inflation higher. The Bank of England can’t produce more oil or gas — but another rate rise risks making households pay for the shock twice.
Er...if households and businesses are spending faster than supplies can meet surely that would mean "stuff" runs out, people/business can't buy it and the economy naturally cools down. So what's the benefit of increasing interest rates? I have never understood the logic of increasing interest rates and making everyone poorer to stop people spending money. Surely things would balance out. And inflation goes up and down regardless!
Spot on with the theory, but the catch is that we aren't actually seeing high demand pushing up inflation this tim, it's rising costs, primarily driven by global energy shocks. Higher interest rates are designed to cool down an overheating economy where everyone is spending too fast. When the problem is supply and external costs, jacking up rates doesn't conjure up more oil or gas; it just lands households with a double whammy of hefty energy bills and punishing borrowing costs!
so the better option for the Bank would be to lower interest rates? that way the economy would be better placed to absorb the external costs being imposed. Blimey - I was so bad at numbers they made me take an arithmetic exam instead of a maths one but even I know messing around with interest rates simply smacks the man in the street with higher or lower mortgage costs (most people don't have enough savings for it to matter - too busy struggling to pay the mortgage and the credit card to have anything left over to put in savings!).
Er...if households and businesses are spending faster than supplies can meet surely that would mean "stuff" runs out, people/business can't buy it and the economy naturally cools down. So what's the benefit of increasing interest rates? I have never understood the logic of increasing interest rates and making everyone poorer to stop people spending money. Surely things would balance out. And inflation goes up and down regardless!
Spot on with the theory, but the catch is that we aren't actually seeing high demand pushing up inflation this tim, it's rising costs, primarily driven by global energy shocks. Higher interest rates are designed to cool down an overheating economy where everyone is spending too fast. When the problem is supply and external costs, jacking up rates doesn't conjure up more oil or gas; it just lands households with a double whammy of hefty energy bills and punishing borrowing costs!
so the better option for the Bank would be to lower interest rates? that way the economy would be better placed to absorb the external costs being imposed. Blimey - I was so bad at numbers they made me take an arithmetic exam instead of a maths one but even I know messing around with interest rates simply smacks the man in the street with higher or lower mortgage costs (most people don't have enough savings for it to matter - too busy struggling to pay the mortgage and the credit card to have anything left over to put in savings!).