With inflation continuing to rise and central banks reacting by raising interest rates, the critical question must be how high will rates have to rise to curb inflationary pressure? To do that, we need to consider what a ‘neutral’ interest rate – one that kept prices steady – would look like, and how much higher …
The impact of negative rates
With negative rates in Europe (the ECB deposit rate is -0.5% though the lending rate is zero), Switzerland and Japan, how low can rates go in the UK? The answer is that they can go lower, which means negative. The Bank of England is currently studying how that would work in practice, with the Governor …