Why interest rates must rise

Economists hold up low interest rates as the answer to our problems, says Merryn Somerset Webb. They are, in fact, the cause.

Do super-low interest rates help the economy or hurt it? Economic models (the ones that central bankers use) tell us they help it. Low rates cut the costs of both servicing existing debt, and taking out new debt. This encourages some to spend, and some to borrow and spend.

The transmission mechanism is easy and obvious. Anyone who can't see how it works or who is calling for rates to rise when the global economy is still so 'abnormal' is therefore an obvious idiot. Or that is how the average economist sees it. We disagree. Why? Because the macro economic models we use today take no account of changing demographics and of behavioural incentives.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.