Скачать или смотреть Why war and oil prices are no reason to raise interest rates

The Bank of England meets on 19 March to decide on interest rates.

Many commentators now say rates cannot fall because war in the Middle East could push up oil and gas prices and increase inflation.

But that argument misunderstands what is actually causing inflation.

If prices are rising because of a global energy shock, raising interest rates will not reduce those prices. Instead, it will increase mortgage costs, reduce investment and push the UK economy closer to recession.

In this video, I explain why imported inflation from oil and gas prices requires a completely different response from the Bank of England.

Not all inflation is the same, and treating it as if it were is simply bad economics.

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00:00 — War, oil prices and interest rates explained
00:50 — Why markets now expect interest rates to stay high
01:30 — Energy price shocks and inflation risk
02:15 — The key question: what is actually causing inflation?
03:00 — Imported inflation vs domestic overheating
03:40 — What interest rates are supposed to do
04:20 — Why rate rises don’t reduce energy prices
05:00 — The “wage-price spiral” argument examined
05:50 — Weak wages and declining bargaining power
06:30 — What higher interest rates really do to households and businesses
07:05 — The danger of recession from bad policy choices
07:40 — Not all inflation is the same
08:05 — Why the Bank of England risks making the wrong decision

TRANSCRIPT
A transcript for this video is available at: https://www.taxresearch.org.uk

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ABOUT RICHARD MURPHY
Richard Murphy is Emeritus Professor of Accounting Practice at Sheffield University Management School. He is director of Tax Research LLP and the author of the Funding the Future blog. His best-known book is ‘The Joy of Tax’.

This video was edited by Thomas Murphy.

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