Richard Murphy is exactly right, and the same analysis applies with equal force to the Reserve Bank of New Zealand. When energy prices rise due to a war in the Middle East, the RBNZ did not cause that problem, and neither did New Zealand workers or households. Yet the orthodox response - raise the OCR, slow the economy, increase unemployment, weaken wage bargaining - deliberately transfers the cost of an external supply shock onto the people least responsible for it and least able to bear it. That is not monetary policy. That is class policy dressed in technical language.
The MMT framing makes this even clearer. Interest rate rises do not create more oil. They do not resolve geopolitical conflicts. What they reliably do is redistribute income upward - to those holding financial assets, to banks earning on reserves, to mortgage lenders - while compressing demand by making borrowing more expensive for households and businesses already under pressure. The inflation that followed Covid and the Ukraine war was always supply-side in origin. It passed as supply chains normalised, exactly as heterodox economists predicted. The rate rises that followed added a demand destruction crisis on top of a supply shock and called it responsible management.
New Zealand is not an exception to this pattern. The RBNZ raised rates aggressively into a supply-driven inflation episode, tipped the economy into recession, pushed unemployment up, and watched inflation fall anyway - as it always does when the underlying supply shock resolves. The lesson was not learned. If the Iran conflict drives another energy price shock, the appropriate responses are targeted fiscal support for affected households, windfall taxes on those profiting from the disruption, and accelerated investment in energy resilience. Higher interest rates would simply add a second, policy-made crisis to the first. Murphy is right to call it what it is: an ideology that has no solution to supply shocks except making ordinary people poorer.
The impoverishing thinking of central bankers who want interest rate rises
taxresearch.org.uk/Blog/2026โฆ The Bank of England is gearing itself up for interest rate rises - to deliberately punish ordinary people for a war they did not create.