Is there no better solution to controlling inflation than raising interest rates? - Yorkshire Post Letters
It would seem that the only mechanism for controlling inflation available to the Bank of England is to dampen the economy by increasing interest rates.
However, the Consumer Price Index takes no account of mortgage rates which are directly affected by increases in interest rates.
Advertisement
Hide AdAdvertisement
Hide AdTherefore, all the millions of people with a mortgage, probably the people most under pressure from increased prices, experience an increase in inflation directly caused by the Bank of England's only tool for reducing inflation.
The impact will not be felt immediately by people with fixed rate mortgages but most assuredly will when they come to the end of their fixed rate deal.
Increasing interest rates is therefore a very blunt instrument for controlling inflation and counter productive for tens of millions of households.
Cannot the clever and extravagantly paid people in the financial world come up with a better solution?