No items found.
Aadesh Gupta
David Wengrow
Damian Phelan
Amanda Dahlstrand
Andrea Guariso
Erika Deserranno
Lukas Hensel
Stefano Caria
Vrinda Mittal
Ararat Gocmen
Clara Martínez-Toledano
Yves Steinebach
Breno Sampaio
Joana Naritomi
Diogo Britto
François Gerard
Filippo Pallotti
Heather Sarsons
Kristóf Madarász
Anna Becker
Lucas Conwell
Michela Carlana
Katja Seim
Joao Granja
Jason Sockin
Todd Schoellman
Paolo Martellini
UCL Policy Lab
Natalia Ramondo
Javier Cravino
Vanessa Alviarez
Hugo Reis
Pedro Carneiro
Raul Santaeulalia-Llopis
Diego Restuccia
Chaoran Chen
Brad J. Hershbein
Claudia Macaluso
Chen Yeh
Xuan Tam
Xin Tang
Marina M. Tavares
Adrian Peralta-Alva
Carlos Carillo-Tudela
Felix Koenig
Joze Sambt
Ronald Lee
James Sefton
David McCarthy
Bledi Taska
Carter Braxton
Alp Simsek
Plamen T. Nenov
Gabriel Chodorow-Reich
Virgiliu Midrigan
Corina Boar
Sauro Mocetti
Guglielmo Barone
Steven J. Davis
Nicholas Bloom
José María Barrero
Thomas Sampson
Adrien Matray
Natalie Bau
Darryl Koehler
Laurence J. Kotlikoff
Alan J. Auerbach
Irina Popova
Alexander Ludwig
Dirk Krueger
Nicola Fuchs-Schündeln
Taylor Jaworski
Walker Hanlon
Ludo Visschers
Henrik Kleven
Kristian Jakobsen
Katrine Marie Jakobsen
Alessandro Guarnieri
Tanguy van Ypersele
Fabien Petit
Cecilia García-Peñalosa
Yonatan Berman
Nina Weber
Julian Limberg
David Hope
Pedro Tremacoldi-Rossi
Tatiana Mocanu
Marco Ranaldi
Silvia Vannutelli
Raymond Fisman
John Voorheis
Reed Walker
Janet Currie
Roel Dom
Marcos Vera-Hernández
Emla Fitzsimons
José V. Rodríguez Mora
Tomasa Rodrigo
Álvaro Ortiz
Stephen Hansen

The interest rate went up, and it's not good news for inequality. Here's why.

The Bank of England raised the main interest rate to 4% on 2 February. What’s the effect of this decision on inequality? Fred Malherbe, Professor of Economics and Finance at University College London and Stone Centre Affiliate, explains one of these effects and what the Central Bank could do about it in his recent column in The Conversation.

Banks receive an interest on their deposits at the central bank which corresponds to the main interest rate. However, banks pay their depositors an interest rate on deposits which is lower than the main interest rate, thus creating a ‘margin’.

Fred observes that such margins (which have dramatically increased since the Summer) most likely reflect market power in the deposit market. This has important consequences for inequality:

  • it generates money for the banks’ shareholders, at the expense of the depositors, especially the less sophisticated ones, who don’t know they should shop around, or don’t know how to do it, in order to find better deals for their deposits,
  • it weakens the effects of monetary policy, making it more difficult to lower inflation, and inflation tends to hurt more the less well off.

Read Fred’s Interest rates: why your mortgage payments are going up but your savings aren’t – and how better monetary policy could help. His column is a great complement to CORE Econ’s:

  • The Economy Unit 10, on banks, money, and the credit market
  • Too big to fail, an Insight on the global financial crisis and how regulatory reforms since then aim to address the problems that arise when banks become too big to be allowed to fail.

Fred Malherbe is Professor of Economics and Finance at University College London and Stone Centre Affiliate. He authored Beyond Pangloss: financial sector origins of inefficient economic booms, with Michael McMahon, which features as a Stone Centre’s research summary


Frederic Malherbe

Frederic Malherbe