Increasing the price of money through higher interest rates would be a crude and potentially damaging way of dealing with inflation, especially when it is being driven by huge rises in a few specific goods. So why not control the prices of such goods directly?
With consumer price index (CPI) inflation rising to a 10 year high of 5.1%, on Thursday the Bank of England became the first of the big central banks to raise interest rates since the start of the pandemic. The Bank did so despite its repeated admission that raising interest rates will do little to address the supply side drivers of the inflation we’re currently experiencing.
A breakdown of the latest inflation figures show that the average rise in prices is still being driven disproportionately by a few outliers, namely petrol, second hand vehicles and energy bills.
As we’ve explored, increasing the price of money through higher interest rates would be a crude and potentially damaging way of dealing with inflation, especially when it is
— source positivemoney.org | Simon Youel | Dec 17, 2021