Monday, December 20, 2010
What Bootle says: Inflation is high because the BoE guessed wrongly
Regular discussion in the comments here about inflating our way out of debt. I think it's less obvious: not only does our Government not really benefit if inflation is high (the interest they have to pay on Gilts is higher, and many of our countries expenses are index-linked) but the Bank of England has probably just decided that any action against inflation would more likely result in larger downside risks (big bust) than the small downside risk of (noticably, but not terribly) higher than intended inflation. nb. Hyperinflation is a completely different beast, indicating loss in confidence in money.