It’s time to rediscover the importance of interest

LONDON: Inflation is back, and along with it a widespread obsession about the future direction of interest rates. This is hardly surprising. In the past, a dose of tight money has brought prices under control. However, interest’s role in ensuring price stability is just one of its many functions. Our neglect of those other functions explains why the financial markets are in such a jumpy state today. James Grant, the founder of Grant’s Interest Rate Observer, calls interest the ‘universal price’ because it performs so many roles.