Mere ¼%-step increases are unlikely to achieve price stability, because they will never catch up with the developing squeeze on fuel and food supplies. It is reminiscent of the 1970s, when the reluctance of the authorities to raise rates sufficiently to deal with the inflation problems of the day simply fuelled the price of gold.
After three weeks of being on pause, the Fed’s increase of its key interest rate by ¼% on Wednesday to a 3.75%—4.00% band was the signal for precious metals to resume their new upward trend. The Fed’s move was a mirror of the ECB’s ¼% rate increase on 10th September but was not followed yesterday by the Bank of England which decided yesterday to keep its rate on hold.
A narrative that consumer price rises are muted despite oil supply disruption was developed as justification for the BoE’s wait-and-see policy. More likely, both the Fed
