The rise in prices spares no country. Some are more affected than others. Among our neighbours, the United Kingdom is about to experience an inflation peak of 10%. So much so that the Central Bank of England decided to intervene
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The British monetary institute raises its key interest rate to a level not seen since 2009: it is an increase of 0.25%, which brings the rate to 1%. The objective is simple: to counter the inflation that is soaring across the Channel. The British central bank forecasts a price increase of 10% in the fourth quarter (against 2% initially targeted), which would cause the economy to contract. We are clearly in what is called stagflation, that is to say little or no economic growth combined with high inflation. One of the most undesirable effects of this situation is the rise in unemployment in a completely seized up economic machine.
Price pressures have increased sharply since the outbreak of war in Ukraine. Individually, States are powerless to curb global inflation, except to take costly measures such as the tariff shield in France to limit the rise in energy prices for households, for example. The real leeway is in the hands of central banks through monetary policy: we regulate through interest rates.
On Wednesday, May 4, the US Federal Reserve (FED) raised its rates by half a point. In Europe, the President of the European Central Bank, Christine Lagarde, clearly suggests that she will raise these rates this summer.
But the undesirable effects are numerous, starting with the repayment of credit for households because borrowing becomes more expensive; for the investment of the companies which also borrow and for the States which must repay the debt. The sweet period of zero rates is over. The moment everyone was dreading and trying to put off has arrived. Rising rates to curb runaway prices. It is in this context that the new five-year term in France opens. And as the Minister of Economy, Finance and Recovery, Bruno Le Maire, said this week: “The hardest is ahead of us” in economic matters.