Topic updates
Monetary Policy - How does raising interest rates control inflation?

17th July 2022
The Economist has produced this excellent eight-minute primer on how a rise in interest rates can help to control inflationary pressures.
Just last week, the Canadian central bank raised their monetary policy interest rate by one per cent in a single hike. Other central banks including the Bank of England has preferred a more gradualist approach.
Read: Bank of Canada increases policy interest rate by 100 basis points, bringing key lending rate to 2.5%
The Bank of England's Chief Economist gave a speech recently on the means by which they hope to bring inflation back closer to the 2 per cent target.
"Getting inflation back to our 2% target is important if we are to have a stable economy that supports people’s jobs and incomes." Read his speech here
At the time of writing the BoE's base (bank) rate is 1.25% but it is expected to climb higher as we head into the Autumn.
Graham Watson's insight:
The interview with Andy Haldane outlines the structural challenges that continue to bedevil the UK economy.
Indeed, Andy Haldane argues that the usual supply-side issues remain and that only an ambitions government with a coherent economic plan would be able to do. However, we've been aware of most of this for nearly 40 years and there's been little progress since then. And as for 'levelling up' - whilst he might believe that there's a case for it - it's never been something that I've been convinced by.
The Monetary Policy Committee voted by a majority of 6-3 to increase #BankRate to 1.25%. https://t.co/31MpeWiCKR pic.twitter.com/LyByVYJ8iw
— Bank of England (@bankofengland) June 16, 2022
In this video we look at countries (in 2022) where monetary policy interest rates are really high and also those where interest rates are negative.
You might also like

Do interest rates affect business investment?
17th October 2014

Monetary Policy: Key Factors Affecting Interest Rates
17th August 2014

Monetary Policy less powerful in recessions
9th October 2013

Twin Peaks for the UK Economy
19th October 2014

Bank of England Chief Economist on the Real Economy
19th October 2014

Wall Street no smarter than Mr and Mrs Average
3rd September 2014

econoMAX - How does Quantitative Easing affect the Exchange Rate
7th November 2013

econoMAX - Forward Guidance is No Panacea
8th October 2013