Inflation and Interest rates

Everyone is talking about inflation at the moment. The MPC’s sole remit is to bring inflation down. The only way they can do that is by increasing interest rates, even though inflation is currently being stoked by high oil prices, which the MPC can do nothing about. So raising rates will just make everyone poorer and the MPC’s inflation target will just slip farther away.

If you want a glimpse of what will happen, look at India – they have just announced that their inflation rate has now topped 11%, despite increasing interest rates to 8%.

http://news.bbc.co.uk/1/hi/business/7448697.stm
http://news.bbc.co.uk/1/hi/business/7465029.stm

We are in for a tough ride! Disappointed

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