The Guardian view on fixing inflation: a reckoning with free markets is needed | Editorial

The Guardian view on fixing inflation: a reckoning with free markets is needed | Editorial

The Bank of England this week joined the ranks of the “enemies of the people”. Damned for the governor’s gloomy but accurate assessment that UK consumers face an “apocalyptic” spike in food prices, the Bank found itself on the front pages of the populist press. The Old Lady of Threadneedle Street stood accused of being “asleep at the wheel” as prices soared.

But hiking interest rates would not have stopped escalating costs. The Bank’s governor, Andrew Bailey, was right when he said that inflation – which reached a 40-year high of 9% – had been driven by international events. Covid supply chain disruptions, the Russian invasion of Ukraine and Brexit are all beyond his control. Higher interest rates are not going to produce more oil or more wheat and bring down the prices of key commodities.

The Bank did deliver a fourth successive increase this month to take its lending rate to 1%. Mr Bailey could argue that if he didn’t push up interest rates when other countries were raising theirs, the pound would depreciate – with potentially inflationary consequences.