If wages start chasing inflation, that can send inflation rising even higher. "Prices are going up of food and energy, and that turns into embedded inflation.
"There are other impacts from raising interest rates, for example it can help push up the value of the pound, but the main way it helps is by limiting the amount of spending in the economy."Īsked if there were other ways of addressing the issue, Ed Conway said: "There is some research that suggests part of what is driving inflation is companies increasing their profit margins.
"What raising interest rates does is curtail the amount of money going into the system, helping to redress the balance. "There is too much money chasing too few goods.
Andrew Sentance, former member of the Bank of England's Monetary Policy Committee, said: "The inflation that we have is that the demand measured in money terms is increasing too rapidly.
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