Interest rates are going up again this week – this is why

Interest rates have nothing to do with either the war or the disruption. So where is the justification for increasing people’s mortgage rates at a time like this, asks Hamish McRae

The central banks have been very bad at explaining what they are doing (AP)

This week interest rates go up again. They will go up here in the UK, in the US and in Europe, with the only issue being how much they go up by: 0.25 per cent, 0.5 per cent, or maybe 0.75 per cent. The stated aim of the central banks is to combat inflation.

Yet we all know that the two principal drivers of inflation this year have been the war in Ukraine and the sanctions that the West has imposed on Russia, and the wider supply-chain disruption that has resulted in the aftermath of the pandemic. Interest rates have nothing to do with either the war or the disruption. So where is the justification for increasing people’s mortgage rates at a time like this?

The central banks have been very bad at explaining what they are doing but their collective actions are putting a damper on the festive season. Add in the understandable labour unrest – understandable because if people face 10 per cent price increases they might reasonably try to get a decent pay rise – and it is all pretty glum.