The cost hidden between purchase and sale
A retailer may pay a supplier weeks or months before a customer buys the goods. If the shop finances that inventory with a loan or credit line, interest accrues while the goods sit in storage or on the shelves. A rate increase can therefore raise the cost of keeping the same stock available, even if the supplier’s price has not changed.
That is the cost-side effect behind Thomas Tooke’s argument. A merchant facing a larger interest bill can absorb it, accept a smaller profit, or try to recover some of it through higher prices. Passing it on is more plausible when rivals face similar financing costs or customers have few alternatives; a shop that risks losing buyers may have to bear more of the expense itself.
Why the medicine can work both ways
Central banks raise interest rates to restrain spending: borrowing becomes more expensive, and households and businesses may postpone purchases. Weaker demand can make it harder for sellers to raise prices. But the same higher rates also increase financing costs for businesses that borrow to buy stock, creating pressure in the opposite direction.
The result depends on which force is stronger. A rate hike does not automatically make every product more expensive, and interest is only one part of a retailer’s costs. But it shows why anti-inflation policy can have uneven effects: the same borrowing cost that cools customers’ demand can raise the expense of getting goods onto the shelf.
