The two main central banks in the advanced capitalist economies, the US Federal Reserve and the European Central Bank (ECB), raised their ‘policy’ interest rates again this week. The policy rate sets the floor for all borrowing rates in these economies. Both central banks hiked their rates by another 0.25%, so the Fed’s rate now stands at 5.25% and the ECB’s at 3.7%. This compares with just 0.25% and 0% respectively two years ago.

The professed aim of these hikes is to ‘control’ inflation and drive the currently high rates back to the so-called target rate that both central banks have of 2%.  I and others have argued firmly, with evidence, that this monetary tightening policy will have little effect on getting inflation down because the causes of inflation do not lie in excessive money supply (the monetarist theory) or in excessive wages driving up prices (the Keynesian theory). Neither of…