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Martin Weale argues for higher interest rates now!
1st February 2011
The newest member of the Monetary Policy Committee - Martin Weale - makes the case here in this article in the Guardian for an early and modest rise in base interest rates.
The key to his view is that there is a risk of higher inflation expectations becoming ingrained in the economy and into the decisions and behaviour of businesses and consumers. Is he right? Is the British economy too fragile to warrant a change in direction in monetary policy? This article is considered and very clear throughout and would make a good discussion document for AS and A2 students.
Martin writes:
“Monetary policy must be made, month by month, based on a judgment about the balance of risks and how they have evolved. A major risk is that the longer inflation remains above target and the more it exceeds its target, the greater the adverse effects on output of bringing it down.”
More here: Interest rates: a risk to bank on
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.