A faction of British economists called "monetarists" warn that interest rates are too high.
The group's focus on money supply as an economic indicator is regaining popularity after they successfully predicted the inflation surge of 2021 and 2022.
- Leading
monetarist Simon Ward warned that high-interest rates will trigger
recessions and deflation in the U.K. the eurozone, and the U.S.
- Ward
noted that "Annual broad money growth rates in the U.K. and Eurozone
are well below their 2010s averages," and said this "suggests recession,
disinflation, and deflation.”
- The view held by so-called
monetarists that quantitative easing triggered inflation contradicts the
consensus shared by most economic experts.
- Mainstream economic experts attribute the interest rate spike in 2021-22 to high energy prices and supply shocks.
- Bank
of England official Silvana Tenreyro said on Tuesday that “QE affects
the economy only to the extent it affects interest rates," adding that
"There is no separate ‘money’ channel that can unleash inflation.”
- RBC Capital Markets strategists have noted that M1, a measure of money supply that includes
savings deposits, demand deposits, and cash, is in negative territory
in the EU for the first time since the bloc's formation in 1999.
