Thursday, March 10, 2011

No rate rise

If not now, then when?

The MPC again ducked out of the difficult but necessary task of raising the bank rate. It is not obvious what they are waiting for. Inflationary pressures have grown considerably stronger over the last six months. The MC have just sat there in their oak panelled meeting room, watching passively as the rest of us have inflation hit five percent.

Wishful thinking won't deliver price stability. Talking tough doesn't do it either. The only known cure for rapidly rising prices is higher interest rates.

1 comment:

  1. Inflation consists of CONTINUOUSLY rising prices. What is happening at the moment is mainly a TEMPORARY rise in prices thanks to the 2008 Sterling devaluation and the increase in World commodity prices. That’s not inflation.

    As long as this so called inflation does not feed thru to wage increases, there is no reason to raise interest rates and indeed, not point: an interest rate rise will not reduce the effects of the above devaluation or the rise in world commodity prices.