No items found.
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
Vasco Carvalho
Gergely Buda
Gabriel Zucman
Anders Jensen
Matthew Fisher-Post
José-Alberto Guerra
Myra Mohnen
Christopher Timmins
Ignacio Sarmiento-Barbieri
Peter Christensen
Linda Wu
Gaurav Khatri
Julián Costas-Fernández
Eleonora Patacchini
Jorgen Harris
Marco Battaglini
Ricardo Fernholz
Alberto Bisin
Jess Benhabib
Cian Ruane
Pete Klenow
Mark Bils
Peter Hull
Will Dobbie
David Arnold
Eric Zwick
Owen Zidar
Matt Smith
Ansgar Walther
Tarun Ramadorai
Paul Goldsmith-Pinkham
Andreas Fuster
Ellora Derenoncourt
Golvine de Rochambeau
Vinayak Iyer
Jonas Hjort
Elena Simintzi
Paige Ouimet
Holger Mueller
Pablo Garriga
Gabriel Ulyssea
Costas Meghir
Pinelopi Koujianou Goldberg
Rafael Dix-Carneiro
Alessandro Toppeta
Áureo de Paula
Orazio Attanasio
Seth Zimmerman
Joseph Price
Valerie Michelman
Camille Semelet
Anne Brockmeyer
Pierre Bachas
Santiago Pérez
Elisa Jácome
Leah Boustan
Ran Abramitzky
Jesse Rothstein
Jeffrey T. Denning
Sandra Black
Wei Cui
Mathieu Leduc
Philippe Jehiel
Shivam Gujral
Suraj Sridhar
Attila Lindner
Arindrajit Dube
Pascual Restrepo
Łukasz Rachel
Benjamin Moll
Kirill Borusyak
Michael McMahon
Frederic Malherbe
Gabor Pinter

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

Related news

Christiane Szerman and Micole De Vera joined the Stone Centre at UCL as the 2023/2024 Postdoctoral Fellows. They share with us what they plan to do during their time at the Stone Centre and afterwards.


Wendy joins a community of over 1,600 distinguished intellectuals, becoming part of the UK’s national academy for the humanities and social sciences. Congratulations, Wendy!


The Stone Centre at UCL launched on 26 May 2022 in Westminster. See what we've been up to in our first year of activities, from the people who joined us to the events we organised.