When fighting inflation, what works for some is of little or no use for others. If prices go up due to supply bottlenecks, increasing the key interest rate could prove as unusefull as cutting an apple in half for the same purpose.

In the U. S. for example, this seems to be the case

According to an analysis made by the Organization for Economic Co-operation and Development (OECD), about half of the inflationary push in the last two quarters was caused here by supply problems, a decrease in production and blockages in delivery.

That affected the available consumer goods on the U. S. market, pushing up prices. Now, Federal Reserve can raise the interest rates or do some quantitative tightening.

Meaning that the Fed could withdraw money from the financial system by halting purchases, or starting sales, of bonds.

But ports cannot be unblocked, and factories cannot be reopen by applying the usual monetary instruments for easing inflationary pressures. At least not on short to medium term.

Fed Chair Jerome Powell has to carefully balance his act in joggling with his two main tools.

According to probabilities derived from market prices by Refinitiv, and cited by Reuters, traders expect U.S. interest rates to peak at between 5% and 5.25% in the first half of next year.

In the United Kingdom, on the other hand, more than half of the price increases in the second quarter were driven by a surge in demand from consumers and businesses.

So, here, Powell’s tools could prove far more handy. Higher interest rates and quantitative tightening are better at curbing demand because they raise the cost of debt and reduce disposable income.

The Bank of England is also aided by a fiscal policy that will restrict demand through lower government spending and higher taxes.

Investors expect UK rates to remain high throughout the year, even though recession already settled in, according to the BoE’s own forecasts.

And that’s because inflation here is stubbornly high, for consumer prices rose 11.1% in October. That’s the highest level in 41 years.

BoE’s Governor, Andrew Bailey, may have the more efficient instruments to curb inflation, but the pain they cause could be just as high.