In the UK, inflation figures were stated to have been disappointing, with CPI falling down from 3.4 per cent to 3.2 instead of the anticipated 3.1 per cent. Unfortunately, interest rates sitting at 5.5 per cent seem to be compromising the average person’s purchasing power and one’s ability to meet day-to-day expenses.

What other options could be explored, therefore? Interest rate reductions are certainly not off the table for later this year. Excessive spending might be, but that is another area altogether…

Ultimately, decreasing them ought to boost productivity and doing so for a month will definitely do no harm.

By opting for a drop, enthusiasm could be sparked and the best way to bring down inflation is via productivity and efficiency, both of which are benefited by a healthy amount of optimism. Unfortunately, interest rates, when an economy is already strained, can harbour the risk of losing their effect on CPI.

Whilst I do not believe that we have reached this point, we could be drawing close to it if we draw this out for too long and a decrease, with the potential for further increases, might not do any harm. Q3 of 2024 could certainly be an option to target.

In fact, a very good outcome could occur, as the small extra amount of M1 might be the reinvestment required for the economy, enabling people to keep up the necessary momentum to maintain levels of productivity. Interest rate patterns need not be linear and could average out to be lower with the same effect, if carefully chosen.

Whilst the idea of interest rate increases is to reduce the money supply in circulation and consequently increase its value, ultimately, certainly in Australia, where the exchange rate is stuck, too many people are paying for it being so.

Counter-intuitively, the RBA could decrease interest rates, assist in boosting productivity and morale, and then increase the cash rate again, so that people can have a break, knowing that interest rates might go up again. The decrease, understanding that there might be an increase again shortly after, would only serve to assist in improving cash flow for families, for example, without having the adverse effect of causing a spike in inflation again.

If we are all in this together and are in it for the long haul, a small U-turn would only create a change in perspective and may actually speed up CPI’s decreasing. It would simply allow people to rejuvenate, whilst rattling any current sluggishness in the exchange rate, which eventually affects productivity; and this would also decrease the chances of CPI becoming stuck.

Sometimes a small contrast is all that is required to create a piece of art.

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