Interest rates in the 1980s

[RosieLeaLovesTea]

Hi all
Can anyone explain to me why the interest rates went up so high in the1980s? I was reading on the Bank of England website that they need to increase interest rates a bit to control inflation but that they won’t go up as high as 1980s. How can they control this?

Part of the problem was the government of the day printed money. Literally.

Because inflation was so high and they needed to cool the economy.

They were also trying to stay within the boundaries of the European Exchange Rate Mechanism

The day John Major pulled us out of the Exchange rate mechanism, the pound had come under attack by currency speculators. They put the interest rates up 5% in one day. that's 20x as much as the rate rise last weekend.

I was on my second mortgage payment, having saved for years to get to that point. I was in tears. I thought I'd lost everything. People were stunned. Then the govt changed tack, pulled us out of the ERM, and reduced the rate the following day.

I've never overstretched on a mortgage again