The Why? Curve
The recession we have to have
Today the Bank of England lifted interest rates again, for the fifth time in a row. Earlier this week interest rates in the US were raised by 0.75%, with much to follow. The reason for the hikes? It’s because inflation is shooting up, largely because of supply chain problems resulting from the war in Ukraine and COVID lockdowns in China. We’re also seeing a shortage of people to fill jobs, giving more people the opportunity to push for higher wages. How will raising interest rates fix those problems? Today Phil and Roger get Kallum Pickering, Senior Economist at Berenberg Bank in London, to explain how he sees monetary policy working in today’s unique set of circumstances. Is a recession an inevitable consequence? In fact, is it necessary if we are to curb inflation? To paraphrase Paul Keating, the Australian Prime Minister in the late nineties, is this going to be the recession we have to have?