Interest rates rise: Sunak’s pledge to halve inflation in tatters
Responding to the Bank of England raising interest rates, Liberal Democrat Spokesperson for the Treasury Sarah Olney MP said:
This news will come as a hammer blow to countless hardworking families.
People seeing their mortgage bills go up by hundreds of pounds a month have been left high and dry by this Government, which sent interest rates soaring with their catastrophic mini budget.
Rishi Sunak’s pledge to halve inflation is in tatters.
The Government could be cutting household energy bills and extending energy support for businesses to help keep prices down. Instead, their inaction means high inflation could continue to harm hardworking people for longer.
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2 Comments
Sarah Olney is obviously right when she says that a tightening of monetary policy, ie the raising of of interest rates, has the effect of increasing some prices. Economists are generally divided between monetarists who favour the current approach for controlling inflation and fiscalists who favour giving taxation and spending adjustments much greater priority.
The difficulty with the latter is that it still has the same paradoxical effect. We raise everyone’s tax bills which reduces spending ability which in turn lowers aggregate demand and so inflation pressures are reduced. Nevertheless this is probably still the ‘less worse’ option for a variety of reasons.
Sarah Olney could be said to want it both ways, except it is perhaps more accurate to suggest she doesn’t want it any way at all. Lib Dems were, as far as I remember, in favour of handing over monetary policy to the BoE with the added responsibility of maintaining an inflation level of 2%. If inflation is higher than that what else, other than raise interest rates, does Sarah Olney expect a central bank to do?
Sarah Olney – please would you avoid this awful expression “hardworking families”. It’s a pathetic parroting of the Labour Party’s “working class people” – it’s all a bit nauseating.
There are millions of people who do not fall into either of these categories and, indeed, may not want to. That doesn’t mean that they aren’t impacted just as much as the category on which you focus (and therefore imply) are the only ones affected.
As Liberals we are surely concerned about all people. We don’t need this class-based mimicking.