The Bank of England has just raised interest rates for the fifth time in the row, warning that inflation is expected to pass 11 per cent by the end of this year. If it had escaped your notice, everything is getting more expensive, and the government is powerless to help. The extent of the Bank’s assistance has been to tell you not to ask for a payrise. Boris Johnson, meanwhile, seems furious that taxes are so high, and will be having stern words with whoever raised them. Even Freddo bars aren’t exempt from the cost of living crisis, shooting up to a frankly outrageous 30p each.
Inflation is essentially a problem of too much money chasing too few goods. Markets don’t like unmet demand, or unused supply. If people are lining up to buy goods that are selling out, prices rise until supply and demand match. This is exactly what’s happening now, with an unusual twist: rather than overheated demand, goods are selling out because production is low.
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