Sir, – Central banks raise interest rates to lower the rate of inflation, but not to reverse it.
Lowering inflation does not lower prices, but lowers the rate that prices increase.
While some prices may fall, like fuel and grain prices, having all prices lower is deflation, an equally bad scenario as high inflation.
The reality is that when inflation falls to a lower level, most prices will stay at their new level.
The contradictory policy is the mismatch between the monetary policy of central banks trying to lower inflation being hampered by the fiscal policy of governments pouring more money into the economy in a fool’s errand to ease the pain.
One of the worst things for a government to do in high inflation is to pour more money into the economy as this keeps inflation high, which only prolongs the misery. – Yours, etc,
JASON FITZHARRIS,
Swords,
Co Dublin.
