Kristina Bluwstein, Sudipto Karmakar and David Aikman
Introduction
Inflation reached almost 9% in July 2022, its highest reading since the early 1990s. A large proportion of the working age population will never have experienced such price increases, or the prospect of higher interest rates to bring inflation back under control. In recent years, many commentators have been concerned about risks to financial stability from the prolonged period of low rates, including the possibility of financial institutions searching for yield by taking on riskier debt structures. But what about the opposite case? What financial stability risks do high inflation and increasing interest rates pose?
