What is the link between inflation and interest rate rises?
inflation is the general rise in prices. therefore, everyone suffers it. The UK itself aims for an inflation rate about 2 per cent. So that means that prices rise by 2 per cent a year. This isn’t a massive amount. If inflation begins to increase, there is a large risk of the inflation rate spiralling out of control. The reason inflation rises is because people are spending more money. Therefore, to control the rate of inflation, the government needs to slow down the rate at which people are spending money. The Monetary Policy Committee will then increase interest rates. The reason this is done is because the higher the interest rates, the more money you receive when you save your money in a bank. So, people will save their money instead of spending it. Higher interest rates also means that banks require you to pay them more money when you borrow. Therefore you wont borrow as much and therefore not spend as much. So your right about the mortgage rises, but not price hikes. The reason th
