Press release - ACF Consultants

 

A rise in interest rates is not the answer to rising inflation and will do more harm to the economy than good, a leading financial consultant has warned.

 

Lawrence Galitz of ACF Consultants, issued his stark message after Chancellor George Osborne predicted in his “Budget for Growth” that inflation will rise to 5% this year before dropping to 2% in two years time.

 

Inflation has been creeping up slowly from 3.3% in November last year, to 3.7% in December, 4.0% in January and 4.4% in February.

 

“In December, the rise in inflation was largely due to higher fuel, utility and food costs,” said Galitz, CEO at the financial training company.

 

“In January the Office for National Statistics blamed it on the increase in VAT, with the cold weather also pushing up expenses. In February, it was the spike in oil prices that drove up domestic heating costs.

 

“This increase in inflation has been caused principally by rising oil prices. But those seeking political reform in the Arab world are unlikely to clear the streets and rush back to their homes just because Britain raises its interest rates. Raising rates has little or no impact on such externalities.”

 

Galitz warned against using traditional techniques to calm inflation fears as he believes the unique reasons for the rise cannot be dealt with in the usual way.

 

“These are unusual circumstances as none of them are demand-led. Price rises such as these are forced onto consumers and businesses alike who have no choice but to accept them and pay up,” said Galitz.

 

“Although rising inflation puts pressure on the Bank of England to lift interest rates, this is the last thing the Monetary Policy Committee should be considering right now.

 

“The economy is still extremely fragile and recovery and growth are both still weak. Raising interest rates would simply be a knee-jerk reaction and pile on further woes for the country rather than boosting economic growth.

 

“We need an environment of lower interest rates to continue for the foreseeable future until economic recovery is strong and assured. Only then should interest rates be raised.”

 

Galitz has already warned of a second period of stagflation when he criticized the Government’s Project Merlin scheme as ‘not being tough enough’ to force banks to lend to small businesses.

 

 

ACF Consultants is a UK-registered private company with offices in London and New York. The company operates globally and conducts training in Europe, the Americas, Asia, Middle East, Africa, and Australia.  ACF’s blue-chip clients are the world’s largest banks and financial institutions. ACF was founded in 1988 and has an established reputation for providing first-rate training and consultancy to banks and other financial institutions. ACF has extensive knowledge, experience and expertise in the areas of banking and finance, and are acknowledged leaders in the development and application of advanced computer-based training techniques and simulations.

 

For further information, contact:

 

Neil Churchill

Results PR
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