Economics Nerd Central/ The Global Inflation Thread

Not sure what people's thoughts are on this but IMHO hiking interest rates is a very blunt tool, surely there is a better way to keep a lid on inflation without such a carpet bombing approach!! Also with the resulting increase in mortgages is it not a bit self defeating in that those increases add to inflation as well.
 

How bad boy

Full Member
Not sure what people's thoughts are on this but IMHO hiking interest rates is a very blunt tool, surely there is a better way to keep a lid on inflation without such a carpet bombing approach!! Also with the resulting increase in mortgages is it not a bit self defeating in that those increases add to inflation as well.
It's not. Fundamentally, this should have been done last year, while growth was good...
 
I should clarify my comment a bit further. I am saying it is a blunt instrument in that it won't tackle the current inflation problem.

The high inflation is mainly due to the cost of energy and it doesn't tackle this issue but instead tries to reduce the growth rate of other areas of the economy which they hope in turn will reduce inflation and/or reduce the consumption of energy to again reduce inflation. It doesn't take into account the societal impact of higher interest rates and to my mind there surely there is a better way................fucked if I know what it is though!!
 

How bad boy

Full Member
I should clarify my comment a bit further. I am saying it is a blunt instrument in that it won't tackle the current inflation problem.

The high inflation is mainly due to the cost of energy and it doesn't tackle this issue but instead tries to reduce the growth rate of other areas of the economy which they hope in turn will reduce inflation and/or reduce the consumption of energy to again reduce inflation. It doesn't take into account the societal impact of higher interest rates and to my mind there surely there is a better way................fucked if I know what it is though!!
Energy itself is a bit under 40% of Eurozone inflation. Quite a bit of the remainder is second order energy inflation, but I'm still convinced an underappreciated portion of it is down to the increase in money supply during the Covid crisis popping up now that the velocity of money has increased.
 
Reading the Irish account by Cormac Lucey in the Times yesterday and it doesn't look we are as well off as we think.

To summarise you would normally look at GDP to understand the size of an economy but as there are so many multi-nationals in Ireland we started looking at GNP but when this was deemed unrealistic we came up with the GNI. Now a study by Honohan is saying that when you take into account purchasing power we actually slip further back due to the high cost of most things here.

So normally we are in the top 2 for wealth in the EU but realistically we are between 8th and 12th. This should have implications for how we plan for the future and what we pay into the EU.

 

How bad boy

Full Member
Fed increased interest rates to 3-3.25% yesterday, Bank of England have just jacked rates up to 2.25%.

There's likely more to go based on the reports of the voting and Fed expected to hit 4.4% by end of year according to consensus.

Expect at least another couple of percent on the ECB interest rate over the next 6 months.

Once again, if you haven't fixed your mortgage rates, do it now.
 

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