It is a tricky one this. Take away mortgage holders, for just a minute. Interest rates going up are an attempt to tackle inflation. The BofE set this policy. The aim, I assume, is to reduce the amount people have to spend which will drive sellers to lower prices or at least stop increases. There is a challenge in this country though in that less people have mortgages than has historically been the case. The impact is therefore lessened. It also takes months for the impact to be seen, as with much monetary policy. We therefore end up with the govt being asked to help again. When you look at how much the govt spent on aid packages like furlough and energy costs we are second only to the US. They did much more than say France. It might be argued that the level of support is a contributory factor to inflation now. So whilst I understand the demand for govt help I think that might need to be a cycle that needs to be broken. Making demands of the banks is reasonable and Hunt will make the case when he meets them tomorrow. In an ideal world the banks would remember the bail out they got in 08 and provide some assistance back. Unlikely as that is. The government do have one thing they could do, which is to raise taxes for us all. That might well be an answer. Imagine the unpopularity a year out from an election though, so there is really no chance of that. This is an ugly challenge to solve. Perhaps everyone, govt, central banks, UK banks all need a common strategy, well explained to the public, so we can all understand it. I reckon it is going to be a tough time ahead, whichever strategy is adopted.
