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The UK State and the Problem of Inflation

In: Proper Economic Policies Under the Post-Pandemic Era

Author

Listed:
  • Philip Arestis

    (University of Cambridge)

  • Nikolaos Karagiannis

    (Winston-Salem State University)

Abstract

The UK high inflation data caused short-term borrowing costs to increase, due to expectations of high interest rates. Two-year gilt yields increased by 0.5% to 2.45% on 17 of August 2022. At the same time, the 10-year long-term bonds were under softer pressure, with the 10-year yield rising by 0.19% to 2.32%. Both gilt increases were due to falling prices of gilts in view of expectations of higher inflation and low level of economic activity. Consequently, inversion of the yield curve emerged. Similar yield curve inversion emerged in June 2023. On the 21st of June 2023, the yields were 4.74% for the two-year treasury yield and 3.78% for the 10-year debt. Increases in interest rates harmed borrowers while yield curve inversion hurt banks, which borrow at short-term rates and lend at long-term rates.

Suggested Citation

  • Philip Arestis & Nikolaos Karagiannis, 2025. "The UK State and the Problem of Inflation," Springer Books, in: Proper Economic Policies Under the Post-Pandemic Era, chapter 0, pages 79-133, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-88520-4_3
    DOI: 10.1007/978-3-031-88520-4_3
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