deVere Group CEO Nigel Green has called interest rate hikes a “blunt yet dangerous” weapon in the fight against rising inflation.
Green’s warning comes as average global inflation reached 7.4% and soared to its highest level in 40 years in the US, UK and Germany.
Green says: “Inflation is a serious global problem. There are real fears of a return to the chronic inflation and recessionary landscape of the 1970s. In an attempt to tackle the scourge of surging prices, central banks around the world are hiking interest rates. But raising interest rates is a blunt weapon in this fight and is also a dangerous weapon too.
“Inflation is hitting lower and middle-income families up to a third higher than the richest ones because they need to spend a higher proportion of their income on essentials such as food and energy.”
While Green said governments need to take steps to protect the poorest families from the worst effects of rising prices, he warned that lower-income households are the ones most likely to have credit and higher interest rates means higher borrowing costs.
He says: “In addition it intentionally slows the economy which might then trigger a recession and stunt companies’ efforts to invest and create jobs which again would have a greater negative financial impact on poorer families.”
Green says the best measures to tackle inflation “lie in getting a conclusive international grip on the pandemic, stopping the war in Ukraine, solving supply-chain problems and significantly ramping up the production of green energy.”
