IN the last week or so, the three leading central banks that influence interest rates and economic policy in the UK have all decided to fix their base rates at levels that they first set late last year, when inflation was running at much higher rates than it is now. The banks in question are the US Federal Reserve, the European Central Bank and, of course, the Bank of England.

In every case, it is not just me who is confused by what these banks are doing: The world’s financial markets also seem to be struggling to explain just what they are up to. It is important to recall that all these banks raised their base interest rates, which then influence all other interest rates within their economies, to supposedly tackle the inflation that we have suffered since late 2021. That inflation first happened as a consequence of the too-rapid reopening from Covid and the resulting confused and disrupted international business supply chains that resulted, leading to the shortage of many goods and so to price hikes.

That inflation was, of course, also fuelled by the onset of war in Ukraine in February 2022 and the massive speculation by financial traders in raw materials at that time that also hiked prices and then led to significant price inflation in the months thereafter, particularly with regard to fuel, but also with regards to food and other costs.

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As I, and some other economists always argued, increasing interest rates would never have had the slightest impact on the price rises that caused this inflation. This has proved to be correct. As historical data measured over hundreds of years has shown, inflation in countries like the US, UK, and the Eurozone never lasts long. Two years is about normal, and that is what has happened in this case. That is because the disruptive events that cause inflation always becomes normalised. As a result, and because inflation measures price changes over a 12-month period, it always returns to its normal level without anyone having to take any action to make it do so. Even the Bank of England thinks that this will be the case in the UK because it is forecasting that inflation will be less than 3% from May this year onwards.

Meanwhile, quite unnecessarily, UK interest rates shot up to 5.25%, which represented an increase of more than 5% since 2021. Many people with mortgages know precisely what that has meant, as will many small businesses and tenants, because increased mortgage interest rates tend to be very quickly reflected in increased rents.

The Bank of England’s logic for increasing interest rates was that there would be too much demand for goods and services in the economy unless they happened. Their suggestion was, as a result, that unless rates rose price rises would continue, and high wage demand would also be made over a long period of time. To counter both of these effects, high interest rates were meant to deliberately create a recession in the UK with demand for goods and services being cut as the result of the creation of a cost-of-living crisis, with wages being simultaneously forced down as a result of growing unemployment. This was always meant to be punitive, and it has been.

The National: The Bank of England is expected to hold interest rates for the fourth time in a row (Yui Mok/PA)

We have suffered a much worse cost-of-living crisis than was necessary as a consequence of what the Bank of England did with interest rates. Most people in Scotland are suffering as a result. What is more, wages have lagged behind inflation. Most people are worse off as a result now than they were in 2021, and there is little sign of that changing.

Despite both these things, those interest rate rises have not had any impact on the inflation rate.  Inflation has fallen because world commodity prices have returned to their pre-war and pre-Covid reopening levels without any intervention by central banks. The bank had no impact on that happening, at all. But the Bank of England punished people with higher prices and pressure for lower wages, nonetheless.

Why, then, are central banks still keeping interest high when inflation is tumbling? An explanation can be found in recent comments from Huw Pill, the chief economist of the Bank of England. He claimed that the bank cannot be sure that inflation has gone away as yet, even though every forecast that the bank has presented for some time shows that this will happen. Instead, his suggestion was that we must wait for interest rate cuts until inflation approaches 2%, and then the Bank of England will reward us for having accepted the whole punishing treatment that it has put us through, even though it has not worked. Patronising arrogance is rarely more obvious than this.

Why mention all this? There are two reasons. Firstly, it is because I think people really do need to know what has gone wrong in our economy, and why it is that the Bank of England has created so much of the pain that we have suffered.

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Second, everyone in Scotland needs to realise that if this is what the Bank of England does then an independent Scotland really will need its own central bank and its own currency so that it can set its own interest rates and be free of the Bank of England forever. That would ensure that nothing like this need ever happen again in Scotland post-independence.

If anyone has ever made the case for a Scottish currency post-independence, then the Bank of England has done so through its gross arrogance, and indifference to the suffering it has imposed on the population of the UK as a whole. Scotland needs to say that this should never happen to it ever again.