Raise interest rates now to avoid medium term shock

Philip Booth appears on BBC Radio Five Live

Philip Booth, IEA Editorial and Programme Director, discussed inflation and the need to raise interest rates on BBC Radio Five Live. Philip welcomed the news that inflation was finally down to its target of two per cent, but he warned that focus should really be placed in the medium to long term.

He was critical of the Bank of England for missing its inflation target in the past four years and furthermore he suggested a small rise in interest rates now. This is because there are worries that inflation may rise rapidly in the medium term as confidence picks up and economic growth is stronger than suggested. A small rise in interest rates now would protect consumers and lenders from any sharp rises in inflation in the future, because the lag in monetary policy is roughtly eighteen months.

You can listen to the full programme here. Philip's segment starts at 1:51:17.

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