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In the News

UK inflation and interest rates - a quick update

Graham Watson

14th September 2022

The latest inflation figures suggest a slight dip in inflation - to 9.9% - but rising costs are eating into household budgets.

Even given the recent action on energy prices, some analysts think that inflation has yet to peak, because despite the fact that petrol prices are falling, food prices and service sector inflation is still rising.

Against this background, whither interest rates? The runes would suggest that the Bank of England is going to continue to tighten monetary policy.

However, whilst there's considerable debate about the efficacy of this, other factors are also in play, notably the recent depreciation of the pound. And it is this that leads many to believe that rates will rise, if only to try and protect the currency from further depreciation.

All of which makes life interesting: what does the 1998 Bank of England Act state that interest rate decisions should be predicated upon?

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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