Dr Lawrence Haar is a Senior Lecturer in Finance at the University of Brighton and editor of the journal Economic Affairs.
On 5 November, the Bank of England’s Monetary Policy Committee (MPC) increased the base lending rate. According to Andrew Bailey, the Governor of the Bank of England, there is now “enough inflationary pressure in the pipeline caused by the rise in energy prices” to warrant an increase, with the situation in the Middle East impacting petroleum prices with consequences across the economy.
All nine members of the MPC voted for a rise: eight for 4 per cent and one for 4.25 per cent. Like the ancient medical practice of blood-letting, which persisted until the 17th century supposedly to cure imbalances in the body’s humours, the actions of the MPC will weaken the economy. It is a misdiagnosis of a non-existent problem and the opposite of what is needed.
