: (UK) why are interest rates continuing to be hiked to combat inflation, when there is a known lag between increased interest rates and decrease in inflation?

Question

Per FT,

“So far, the evidence from the BoE’s own forecasts on the persistence of inflation is that it has done too little too late to control inflation. That means it has a more difficult inflation problem to resolve than it and most analysts previously thought.”

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So why is the forecast for late 2023 rise to 5.75-6%? Sounds like a bad idea…

In: 1

Answer 1

>So why is the forecast for late 2023 rise to 5.75-6%? Sounds like a bad idea…

Because not raising interest rates is worse.

Like, yeah, they didn’t raise them early enough. But that doesn’t mean not raising them was the better option.

Answer 2

Why does raising interest rates sound like a “bad idea”? All you’ve mentioned is that inflation is worse than people initially expected. Are you suggesting that we should therefore do nothing?