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UK inflation up to 4.4% in July
Comments
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If the pound was stronger then food and fuel would be cheaper.
How do we make the pound stronger? Raise interest rates!!
:money:
Stop talking sense.
Ironic how the price rises get shrugged off as 'imported inflation' and therefore no point raising interest rates, when the one thing you can do to bring prices on imported stuff down is to strengthen your currency. Which, all things being equal, higher interest rates would have the effect of doing.
But that's not the message that the 'keep interest rates low' lobby want you to hear and they have had the ear of government for years. In fact, low interest rates and lax lending are what got us into this mess.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
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Stop talking sense.
Ironic how the price rises get shrugged off as 'imported inflation' and therefore no point raising interest rates, when the one thing you can do to bring prices on imported stuff down is to strengthen your currency. Which, all things being equal, higher interest rates would have the effect of doing.
But that's not the message that the 'keep interest rates low' lobby want you to hear and they have had the ear of government for years. In fact, low interest rates and lax lending are what got us into this mess.
The oil price has quadrupled in a couple of years. The price of many basic foods has doubled in little more than a year. An increase in the value of the pound by a few % isn't going to reverse those sorts of price increases.
How much do you think the £ should rise by? I'll have a go at guestimating the impact on inflation.0 -
how about base rate up by 0.5%?0
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The oil price has quadrupled in a couple of years. The price of many basic foods has doubled in little more than a year. An increase in the value of the pound by a few % isn't going to reverse those sorts of price increases.
How much do you think the £ should rise by? I'll have a go at guestimating the impact on inflation.
I don't need to produce a spreadsheet - raising interest rates would strengthen the pound, putting downward price pressure on all imported goods and materiel. Which, if the BoE really are worried about controlling CPI is exactly what they should be doing.
They clearly believe that we are headed for a monster recession - it's the only possible reason why they wouldn't raise rates now. They are trying to ease things for businesses that might be on the edge and are gambling on recession imposing deflation.
If on the other hand we see more commodities bubbles - which are a strong possibility IMO - then this is going to have some very nasty effects on the UK saver/earner with savings and earning power strongly eroded. We'll get stagflation but it won't be in the 70s environment of ever-rising wages (made possible by export-led industries gaining from the weak pound) - it'll be against wages which are not increasing and savings which are losing buying power compared to inflation.
The 'money in circulation' in the real world economy will be deflating courtesy of credit contraction, but there will be plenty sloshing around the world of the international markets.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
how about base rate up by 0.5%?
That's not going to impact on inflation in any meaningful way while it's the cost of food and fuel that's causing it to rise.
The most likely impact would be that inflation would increase as the proportion of income that has to be spent on essentials would rise => the weightings of these items to rise in the inflation basket => inflation rising.
The only way to reduce inflation for the BoE acting alone is to increase interest rates to such an extent that people can no longer afford fuel or food and so grow their own food and walk places. We call countries with economies like that the Third World and it seems a strange economic policy to pursue deliberately.0 -
That's not going to impact on inflation in any meaningful way while it's the cost of food and fuel that's causing it to rise.
The most likely impact would be that inflation would increase as the proportion of income that has to be spent on essentials would rise => the weightings of these items to rise in the inflation basket => inflation rising.
The only way to reduce inflation for the BoE acting alone is to increase interest rates to such an extent that people can no longer afford fuel or food and so grow their own food and walk places. We call countries with economies like that the Third World and it seems a strange economic policy to pursue deliberately.
The real problem with raising rates now is that the nation on a personal and business level has become a debt junkie - becoming totally dependent on borrowing and carrying large existing debts that it is struggling to service.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
The real problem with raising rates now is that the nation on a personal and business level has become a debt junkie - becoming totally dependent on borrowing and carrying large existing debts that it is struggling to service.
I agree. Interest rates were too low for too long. We should have allowed prices to deflated as that was 'good deflation' caused by an increase in the world's productive workforce due to large numbers of Chinese and Indians starting to work in jobs that are far more productive than they were doing previously (often subsistance farming). Instead the BoE kept interest rates low and when the price of something is low, people demand more of it usually. With money it is no different and the price of money is the rate of interest.
The problem is, we are where we are not where we want to be. It's no good being like the apocryphal man giving directions, "Well I wouldn't start from here if I were you".
I don't really see what the BoE can do except dither and hope the economy finds it's own way out of the situation. Half a % on or off interest rates is going to make no substantive difference to things and oil and food prices can't rise forever.0 -
The only way to reduce inflation for the BoE acting alone is to increase interest rates to such an extent that people can no longer afford fuel or food and so grow their own food and walk places. We call countries with economies like that the Third World and it seems a strange economic policy to pursue deliberately.
It would sort out the obesity epidemic, thus killing two birds with one stone. People would leave the country, sorting out the "housing shortage" & my savings would flourish.
A plan with no flaws"Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
steadysaver wrote: »UK inflation has risen to 4.4%
http://news.bbc.co.uk/2/hi/business/7555788.stm
More worrying is the rate of RPI has risen to 5%. I am hoping this cools off come march as my student loan interest rate will increase further. People coming out of Uni now will be left with a small mortgage before they even start life.
More damaging news for ftb saving up deposits.
Borrowers will be happy of course at the expense of savers, Interest rates wil have to rise in my honest opinion. We are probably already in a recession with inflation in my opinion double the publicised figures.0
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