4 ms·
Inflation in UK is 8.6% while interest rate is 2.25%. Interest rate should be higher than inflation. It is really similar economic position. Government trying t
by slaw 4y ago
Inflation in UK is 8.6% while interest rate is 2.25%. Interest rate should be higher than inflation. It is really similar economic position. Government trying to print out of debt.
https://en.wikipedia.org/wiki/Taylor_rule https://en.wikipedia.org/wiki/Taylor_rule
- singron 4y agoI don't think the Taylor rule says interest rates should be higher than inflation. It seems like it's dependent on the weights you pick. Historically it's not been true either. If that is some implication of the formula I'm not gleaning, then please spell it out.
- imtringued 4y agoThere is a monetary component to inflation and a non monetary component to inflation. If energy prices go up, that doesn't mean the government is doing deficit spending in excess of what the economy can handle, it can mean that OPEC is colluding or an important fossil fuel trade relationship between countries crumbled. That doesn't mean there isn't monetary inflation, surely a positive interest rate is justified for now but I don't think it has to go all the way to 8.6%.
- birdyrooster 4y agoThe Fed has stopped reissuing defaulted loans and is removing nearly $100B of liquidity per month. I think more significant than the interest rate is the amount of money being removed from the supply.