Read more: Fed interest rate hike – reaction pours in
However, according to Professor David Blanchflower, who sat on the Bank of England’s monetary policy committee between 2006 and 2009, increasing rates further would be an “error”, claiming that a number of countries, including the US, were already in recession.
Speaking on a BBC radio show, Prof Blanchflower pointed at the 2008 financial crisis as a similar example. “In August 2008 we had exactly the same arguments – oil prices were high, inflation was high. And what happened in the months following? Inflation started to plummet. History suggests that those who argue that inflation is embedded are completely wrong,” he said, adding that t. was no evidence the situation was the same as in the 1970s.
“These are shocks, but these shocks will actually start to dissipate, and inflation will come down as it always has done.”
Kirk Tatom, president of Tatom Lending, however disagreed with that assessment. “Mr. Blanchflower is correct in that this will only exacerbate a recession. However, t.’s no other way out.