War is not a reason to raise interest rates

The Bank of England meets on 19 March to decide on interest rates.

Many commentators now say rates cannot fall because war in the Middle East could push up oil and gas prices and increase inflation.

But that argument misunderstands what is actually causing inflation.

If prices are rising because of a global energy shock, raising interest rates will not reduce those prices. Instead, it will increase mortgage costs, reduce investment and push the UK economy closer to recession.

In this video, I explain why imported inflation from oil and gas prices requires a completely different response from the Bank of England.

Not all inflation is the same, and treating it as if it were is simply bad economics.