America should call Rishi Sunak for help

RISING inflation rates were inevitable after two years of lockdown. The impact of Putin’s war has simply added fuel to the inflationary fire that has engulfed the global economy.

Readers shouldn’t ask why interest rates are now rising but why they weren’t raised earlier. Readers should also note that present rates are not exceptional in historical context. What was exceptional was the near zero interest rates of the last 15 years.

Raising interest rates is a blunt instrument for taming inflation. To be effective, interest rate measures need to operate with fiscal (taxation) measures.

That is why on 17th November the Government will raise taxes and cut spending. The aim will be to eliminate the budget deficit. Though there will be an economic downturn, though unemployment will rise, it is believed only these actions will reduce inflation in the long run. The financial markets now demand it.

All European countries now suffer with high inflation rates. They will all end up taking actions similar to that taken by the UK. So where Rishi leads, others will follow.

At around 4% of GDP, the UK’S budget deficit is similar to that of France, and this year’s UK figure has been impacted by exceptional winter fuel payment costs.

Contrary to what media hysteria suggests, the UK’S financial position isn’t too bad and the Bank of England predicts inflation will halve by next year and be below 2% in 2024.

There are reasons to be optimistic as long as Greta Thunberg and Vladimir Putin can be kept under control.

Arguably, the country with the most troubled financial position is the US. The US has high inflation and the American Congressional Budget Office expects the US budget deficit to average over 7% of GDP for the next 30 years.

The US economy is in a serious mess and America needs help. If the Americans want to get themselves out of this mess, they’d better call Rishi.

M. Judge, Coventry.