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Cake day: June 11th, 2023

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  • Can someone smart explain this to an A-level econ student?

    The inflation we’re seeing is mostly imported cost push, from rising energy prices, cost of raw materials ect, which interest rates should have marginal impact on, no?

    The IR is used to impact AD and change demand pull inflation, and is risen to lower investment and consumption and therefor DP inflation, which appears to already be very low.

    Why is the BoE increasing IR to counter inflation that isn’t demand driven? Is it just to make it look like they’re doing something or am I dumb?