A further outcome of the Bank of England’s current policy to raise interest rates to try to bring inflation back under control has been its effect on the housing market. There is an entire generation of homeowners who have never had to contend with their mortgage repayments increasing as is being seen currently.

With inflation unlikely to begin to fall in the short term and the current cost of living crisis, households are being forced to cut back in several areas. The knock-on effect of this is a fall in levels of activity on the High Street, which, in turn, drives retail sales lower.

This then ripples through the economy and eventually contributes to a slowdown. The one difference from the current situation is that a slowing economy generally leads to a fall in inflation as activity drops but that is not the case currently, with several factors combining to push prices higher.

Energy remains the major contributor to inflation in the UK. The forecourt price of a litre of unleaded petrol is now approaching two pounds. This means that it now casts almost £100 to fill the tank of a regular family car.

When Chancellor of the Exchequer, Rishi Sunak, was pondering a windfall tax of energy companies recently, one of the main downsides of such a policy was economists’ belief that every tax eventually becomes a burden for the individual.

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