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Here are two Guardian business blog stories from this morning:
Let’s be clear that to blame this all on inflation is absurd and wrong. Some does have that cause, but then much of the current inflation (in housing, rents and regulated items) is directly down to cost inflation unambiguously caused by Bank of England interest rate rises, which means that to suggest inflation is at fault is to fail to ask the question as to why inflation is continuing. It also fails to ask the question about whether that inflation rate – and so this cost (including the also absurd cost of paying interest on central bank reserve account balances) could be controlled by government action.
The answer to that is, of course, that this inflation rate could be reduced now by cutting interest rates, and quickly, which the Bank of England says it will not do. But as the second story notes, markets do not believe them:
Markets are expecting interest rates of 4% or less in a year’s time.
My suggestion is that the Bank of England deliver on that expectation now because interest rates are already strongly positive within the economy now and are creating a real drag on it. There is a need for a rate cut of at least 2 per cent to be put in place immediately. More should then follow.
That way, we might avoid recession.
And the cost of government borrowing, and all the excuses for austerity that flow from it, would disappear.
Some economic problems are easy to solve. This one really is.
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