Will interest hikes stop this inflation.

The inflated money supply has to play itself out. The Government printed money to give to people as a reward for sitting at home during Covid. At the same time, because people were sat at home letting their money mount up and weren't at work producing and making goods ….. when the Government eventually stepped out of the way and allowed the economy to function there was and excess of cash and a shortage of goods to buy.

Producers could ask more for (push up prices)  the scarcer goods, and as there was plenty of money about , prices could and have spiralled. Employers now getting more income having increased the price of their wares, could more readily agree and meet demand for wage increases.

The higher interest rates will help remove some of that money from the economy, and prices will not rise as fast if people can't afford to pay those higher prices.Increased mortgage payments funnel money from consumers to the banks, increased interest rates encourage the elderly to put more cash into an ISA or to invest in shares in Pawnbrokers or shares in whichever companies manufacture cluster bombs etc.

The young, who don't stay young for long, won't max out their credit card if the repayments are now much more expensive, nor will they borrow money for holidays or to buy a car if the interest rates make things prohibitively expensive. With people unable to afford to borrow at the new high rates, the excess money the banks have collected won't come back out into circulation, which will also dampen price rises.






Because it doesn't feature celebrities, nor does it involve accusations of racism.







It will take time to work. So far there was enough spare money about to pay greatly increased energy costs. Once companies and businesses start going bust due to not having sufficient money to repay borrowings or meet energy costs, once they make their workers redundant etc it will reach the point where energy price rises will slow down because there will be far fewer businesses and households able to pay them. If high prices equal no customers, the high prices gain you nothing.

No.

The reason is simple and was glaring in a web page i saw probably on the BBC News

I am of the generation who saw their MIRAS subsidised mortgage rate hit 17.5% the year or maybe two years after we started our liw cost endowment at 8% in 1983

Back then interest rates worked as a brake in inflation because no one had a fixed rate mortgage so the hike was instantly transformed into anti thatcher pain

Now 85% of mortgages are in a fixed rate deal of some sort.

The Bank of England has only one weapon, but it has stuff all effect for months.

Yes there will be poverty to match the 1930s and repossessions to match thatchers second term

But none if them will hit until after Sunak is evicted.

Well the interest rate rises (and expected future rises) have pushed up the value of Sterling which makes imports cheaper - so yes they are having an effect. Also raising interest rates mean people with mortgages have less money to spend on other things so that reduces demand.

If there is a better alternative nobody has suggested it.

Pacifico 

This is true, and we have to brace ourselves for the consequences. Cheaper imports make home produced goods less competitive, leading to loss of jobs.
'Pushing up the value of sterling' makes our exports more expensive abroad, leading to loss of jobs among those British companies that rely on the export market. Households forced to use the bulk of their income on loan and mortgage repayments have little left to spend to keep our retail businesses afloat.

A recession to clear out the malinvestments of many years, possibly decades, that sends the Nail bars etc to the wall, has been long overdue, but successive Governments have put off the day of reckoning by printing money, thereby keeping the zombie companies afloat. 

Even if you don't subscribe to the theory that sanctions were always aimed at harming the Western European economies, as a twin pronged assault along with a military conflict harming Russia (no prizes for working out who intended to clean up if both Europe and Russia were both their knees), the results are becoming more clear by the day, and Bailey and the Bank of England belatedly allowing interest rates to head in the direction they should have been free to go many, many years ago might dent inflation, but the destruction of Western economies is still very much on the cards. 

Increased supply in the fuel market and increased supply in other markets would reduce inflation.

Problem is a major supplier to the global fuel market invaded a major supplier to the world food market.

Until it can go back to being business as usual, the problems will continue.

That's a power we got back after leaving the EU and haven't used.
Worth debating if we should.

Business as usual, particularly once Nordstream 1 & 2 were in full flow, was destined to create an increasingly wealthy Russia and Western Europe, and those clever and industrious Chinese were progressing in leaps and bounds as well. Someone could sense their pre-eminent position was slipping away ...... and had to devise ways of throwing a major spanner into the economic works of both regions. The war spanner for Russia and the sanctions spanner for Europe ..... with both economies crippled, full concentration on a massive spanner to clobber China, and hey presto, the old order is restored.

While political deviousness and planning is the root cause, broadening the discussion away from the relationship between interest rates and inflation is probably not what the original poster wanted or intended. I'm sure Vinny will agree.