Sir, – I am no financial scholar but I did economics in my Leaving Cert all of 45 years ago and I recall the explanation for inflation being a condition caused by excess of demand over supply in a strongly growing or even “overheating” economy.
Things are going well, wages are up and the demand for goods and services in the economy get to a level that supply can’t keep up and prices start to rise. In this scenario, a prudent central bank may raise interest rates to reduce the level of demand and give supply a chance to catch up.
All very sensible and easy to understand.
What is happening now is none of the above.
RM Block
With Ireland being the exception, most of our European cousins have economies that are underperforming or stagnant and the last thing they need is an increase in interest rates, which will only bring more pain on top of the problems that will arise due to higher energy costs.
The European Central Bank’s singular obsession with inflation requires a slightly more nuanced assessment as to the cause of inflation rather than a lazy knee-jerk reaction.
I thought you had to be smart to get a job in the ECB? I think I’ll send them my CV. – Yours, etc,
John Lombard,
Goatstown,
Dublin 14.
