MSE News: VAT rise triggers inflation hike

ILW

Really2 wrote: »

BoE base rate is nothing to do with mortgage or savings rates unless they are BOE base linked (As you said tracker).
All other lending is open to market forces. So it just so happens in a time of low BOE base the disparity has grown.

Not surprising really you would make nothing if you lent at 0.5% it would hardly cover your costs etc.
Also not many want to save at 0.5% either so as a guide you will see more parity between 2Y fixed rate savings and mortgages. As that is showing costs of borrowing and lending money for banks a BS's.

(they borrow your savings and lend them to someone else, a little simplistic but it gives an indication of demand for money)

So what is the point of the BoE base rate then?

Really2

ILW wrote: »

So what is the point of the BoE base rate then?

Bank borrowing, deposits linked lending & Borrowing (business loans not just mortgages)

Gen may be your man but base rate is little to do with us end users.


I tend to think as base as a supplier cost. It is not retail price, to you it may be relevant but to banks I would say it most certainly is not..

ILW

Really2 wrote: »

Bank borrowing, deposits linked lending & Borrowing (business loans not just mortgages)

Gen may be your man but base rate is little to do with us end users.


I tend to think as base as a supplier cost. It is not retail price, to you it may be relevant but to banks I would say it most certainly is not..

So if banks can borrow from the BoE at 0.5%, why are they offering savers 3%?
I am not questioning your reply, i just do not understand how it works.

Really2

ILW wrote: »

So if banks can borrow from the BoE at 0.5%, why are they offering savers 3%?
I am not questioning your reply, i just do not understand how it works.

Not all funding is the same though is it can you get 3% on a current account?

Really2 wrote: »

Also not many want to save at 0.5% either so as a guide you will see more parity between 2Y fixed rate savings and mortgages. As that is showing costs of borrowing and lending money for banks a BS's.

(they borrow your savings and lend them to someone else, a little simplistic but it gives an indication of demand for money)

The above is far more appropriate to consumer lending. Also they can not just secure al funding from the BOE

As far as I know BOE base is more appropriate to banks day to day funding/running.

It is not a long term interest rate.

I am not a banker so some others on here may be able to give you a better idea.
But like I said looking at it and thinking you should get it is way of the point.
BOE base as never been linked to lending and borrowing unless specifically stated EG tracker. It is not designed to show market value.

jim83

I am somewhat sceptical about the figures released this morning.

CPI is showing a downtick in this latest release, suggesting that prices actually fell 0.2% between December and January. Whilst this would normally be expected in a January, I find it hard to believe this year given the VAT rise, relatively lower seasonal discounting, etc.

There are fairly large discrepancies between the CPI figures and what is reported elsewhere, for example:

• It has previously been reported that food prices rose 2.8% in January (something I can anecdotally attest to) but the ONS is claiming in this release that food prices actually fell by 0.2% in that period.
• The ONS is also calculating that fuel prices rose by 2.2% in January. Again, this does not seem to tally with figures suggesting a 3.2% rise.

CPI is a notoriously complicated metric, but from my layman's perspective something seems amiss here.

ILW

So if it is not what the banks can borrow at, and has no link to either borrowing or savings rates, what is the relevance, and why is such a fuss made about it?

Really2

ILW wrote: »

So if it is not what the banks can borrow at, and has no link to either borrowing or savings rates, what is the relevance, and why is such a fuss made about it?

I think it is you making the fuss about it.

The only relevance to consumers and business as said for the 3rd time now is if they are on base rate related deals.

Is the cost price of an apple to you personally relevant? No
Is it relevant in the grand scheme of the apple business? Yes

Base rate has a number of effects, it can help lower or increase the trading value of our currency etc.

Just because it does not effect you personally it does not make it irrelevant. I am on a tracker so it is highly relevant to me.

Apples and oranges

Wookster

I love how inflation is being described as "a one off."

It is not, it is what it is. You can't say well I've had to buy a new car but that's OK because its a one off - you have still spent the money. Period.

Inflation has remained higher than expectation (almost?) every month in the last 18 months.

ILW

Really2 wrote: »

I think it is you making the fuss about it.

The only relevance to consumers and business as said for the 3rd time now is if they are on base rate related deals.

Is the cost price of an apple to you personally relevant? No
Is it relevant in the grand scheme of the apple business? Yes

Base rate has a number of effects, it can help lower or increase the trading value of our currency etc.

Just because it does not effect you personally it does not make it irrelevant. I am on a tracker so it is highly relevant to me.

Apples and oranges

Sorry, I think you have got me wrong.
I was never querying bank rate for me personally, I just would be interested to know what the actual mechanism is that means BoE rate affects what retail rates are. (or not) A big announcement is made every month, but I have not got a clue what it actually means and would love to find out. In the end, is it only relevant to people on tracker products?

inspector_monkfish

ILW wrote: »

So if banks can borrow from the BoE at 0.5%, why are they offering savers 3%?
I am not questioning your reply, i just do not understand how it works.

Banks don't borrow from BOE at 0.50%

0.50% is what the BOE pay Banks when they deposit money overnight with them.