Josh Ryan-Collins urges Bank of England to resist rate rises

Interest rates are not the tool to solve inflation caused by the US–Iran war, Bank of England faces another supply shock, Josh Ryan-Collins argues for controls over tightening

The Bank of England’s rate-setting committee meets this week with markets bracing for a reversal in the easing cycle. In a Guardian column, economist Josh Ryan-Collins argues the pressure to lift borrowing costs is a repeat of the policy reflex seen during the post-Covid inflation spike and the energy shock after Russia’s invasion of Ukraine: central banks respond to price rises by squeezing demand, even when the immediate driver is a disruption in supply.

Ryan-Collins points to the Strait of Hormuz as the proximate mechanism. With Iranian military action effectively closing a corridor that normally carries an estimated 20% to 30% of global oil, gas and fertiliser inputs, benchmark oil and gas prices have jumped by more than 40% and 50% respectively, he writes. In the UK, where gas prices feed directly into electricity costs, the household energy price cap delays the hit until summer, but pump prices move faster: diesel is up about 12% and petrol about 6%, according to the column. The government has already announced a £53m support package for rural households that heat with oil.

The argument is less about the size of the shock than about who pays for it. Higher policy rates do not reopen shipping lanes or increase global fertiliser output; they transmit the cost of a geopolitical disruption into mortgages, business loans and job security. Markets’ expectations have already shown up in higher mortgage pricing, Ryan-Collins notes, even though the Bank has been cutting gradually from a peak of 5.25% in summer 2024 to 3.75% amid flat growth.

He cites evidence meant to undercut the idea that the 2022 rate hikes “fixed” inflation. In his telling, the clearest reason inflation fell was that energy and food prices eventually declined. He points to a 2025 IMF study finding that inflation-targeting central banks that raised rates rapidly in 2022 did no better than non-inflation-targeting peers in dealing with the 2021–22 price surge.

The column situates today’s debate in a longer institutional memory: central banks remain shaped by the 1970s oil shocks, when energy price rises were followed by wage-price spirals and aggressive monetary tightening. But the present UK labour market, union power and pricing dynamics are not the same as in the early 1970s, and the costs of using unemployment and recession as the brake are more politically explicit when households are already dealing with elevated housing costs.

Ryan-Collins’ alternative is a package of direct interventions—price controls and caps, and greater public ownership in energy—arguing that if the problem is a war-driven input shock, then the policy response should target pricing and supply rather than suppressing domestic demand.

The Bank of England’s meeting will still be decided in the language of inflation expectations and credibility. But the immediate facts Ryan-Collins highlights are concrete: oil and gas prices are rising on a chokepoint disruption, the government is already subsidising some households, and mortgage rates are reacting before any formal decision is taken.