Recession is the threat, not inflation

Now is not the time to raise interest rates

The current narrative about the economy is that price rises are a worrying sign. Long-term price inflation devalues people’s savings, discourages investment, and can create shortages. The textbook remedy is for central banks to raise interest rates, essentially making money more expensive, driving prices back down. But according to a new study, there are powerful signs that the US economy is going into recession, something that will likely impact the UK and other economies around the world. If that’s the case, raising interest rates should be the last thing central banks should be doing now, argue ex-Bank of England advisor, David Blanchflower and Alex Bryson.

 

All is not quite as it seems in the world economy.  Whilst the worst of the COVID pandemic may be over in developed economies its effects continue to reverberate both here and on the other side of the Pond.  Indeed, in a paper we have just

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