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When politicians demanded UK banks pass on higher interest rates to British savers, they thought they were doing the country a favor. But in the fight against inflation, they were shooting it in the foot.
The policy has put more money in people’s pockets, supporting household spending power while wage growth remains high. That rows against the Bank of England’s higher rates, which are meant to restrict borrowing and spending in the hopes inflation will fall. The experience of households, companies and banks in the UK contrasts sharply with that of European countries such as Italy and Spain, where banks aren’t getting in the way of monetary policy.
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