Why aren't interest rates going up?

kidmugsy

coyrls wrote: »

I thought it was pretty much accepted that the Brexit vote caused a devaluation of sterling that in turn caused a rise in inflation.

Accepted by whom, and on what evidence? The same people who promised that if the Brexiteers won your hair would all fall out the next morning?

I repeat; if it's to do with the Brexit vote how come inflation is rising in the Eurozone and the USA too? It seems to me that the assumption that it must to do with the referendum is the sort of sloppy, uncritical, superficial thinking that so dominates the media. Oh, or plain biased.

Reaper

kidmugsy wrote: »

Accepted by whom, and on what evidence? The same people who promised that if the Brexiteers won your hair would all fall out the next morning?

I repeat; if it's to do with the Brexit vote how come inflation is rising in the Eurozone and the USA too? It seems to me that the assumption that it must to do with the referendum is the sort of sloppy, uncritical, superficial thinking that so dominates the media. Oh, or plain biased.

There is no debate that sterling fell on the Brexit vote, you only have to look at a chart to see it.

Typically lower sterling is good news for exporters as they can sell their goods abroad cheaper, but bad news for imported goods and raw materials as we have to pay more for them.

Of course this is only one factor affecting inflation, money supply for example is likely to have a much bigger effect, but I think you will be on weak ground if you try to claim Brexit has had no effect on inflation at all.

You could also claim weak sterling is a good thing. Certainly many governments have been trying to get their currencies lower in the "race to the bottom". Though it will tend to benefit companies more than the public.

metrobus

Who actually believes the inflation rate is 2%?

Cheapest duel fuel bill for a average user is up 20% from last year
Petrol up 20% Council tax 5%,most insurances up 7.5%, Beer in pubs up around 10%, Food
prices forever increasing,even something like sending a letter has gone up 7%.

The rate is manipulated to stop the government having to pay inflation linked benefits eg old age
pension at the true rate.

AnotherJoe

kidmugsy wrote: »

Accepted by whom, and on what evidence? The same people who promised that if the Brexiteers won your hair would all fall out the next morning?

I repeat; if it's to do with the Brexit vote how come inflation is rising in the Eurozone and the USA too? It seems to me that the assumption that it must to do with the referendum is the sort of sloppy, uncritical, superficial thinking that so dominates the media. Oh, or plain biased.

LOL. So you reckon it was an uncanny coincidence that the £ fell around 20% on the dollar (and IIRC 15% on the Euro) the moment the markets opened on the morning after the referendum? And since something like 60% of what we consume and produce is imported, just what effect do you think that has had on inflation?

JohnRo

metrobus wrote: »

Who actually believes the inflation rate is 2%?

Indeed, years of hidden inflation via disguised shrinking weights and measures, alongside quality dilution, quite literally in the case of many mass market food stuffs.

One thing for certain about brexit is that general living standards are going to suffer for the foresseable, which is obviously a price the kippers are willing to pay. Of course they'll just blame it all on everyone else, again.

masonic

metrobus wrote: »

Who actually believes the inflation rate is 2%?

Not many people. The reason to mention CPI is that the BOE sets a target around CPI. There are other measures of inflation that are more realistic (i.e. higher), and if people do their own sums they'll likely find their own personal rate of inflation is higher still.

It's probably best to assume cash in a savings account is always losing its spending power. Therefore it's generally best not to hold more in cash than you need for your short term spending and rainy day needs.

Freecall

We each have our own personal rate of inflation based on our individual consumption profile of course but to suggest that somehow we are decoupled from the world economy is just daft.

The fact is that like it or not, world markets operate in USD. Now that sterling is worth about 20% less than it was before the vote in June, we will need to make up the difference in value with more pounds when we purchase something (if we want to purchase the same goods). That reduction in the value of a currency is usually called inflation.

It is far to soon to see this effect directly in prices, there is inevitably a time lag before the impact is seen. This does not mean that price pressure does not exist however, we just need to get used to a proportionately lower standard of living.

On the plus side, lower wage economies (in world terms, U.K. workers have effectively taken a 15-20% cut in their salaries) tend to benefit from near full employment.

Terry98

Freecall wrote: »

On the plus side, lower wage economies (in world terms, U.K. workers have effectively taken a 15-20% cut in their salaries) tend to benefit from near full employment.

I agree with you and when that is reflected in the prices in the shops we all know what will happen.

Living standards for the vast majority of the population have already dropped since 2008.

Wasn't there a report last week that 19 million people do not have enough to have a decent standard of living?

Reaper

Terry98 wrote: »

Wasn't there a report last week that 19 million people do not have enough to have a decent standard of living?

Yes, although I was suspicious of it as the definition of what the minimum should be was obtained by a survey asking members of the public what it should be.

Equally dodgy are the regular reports saying how many are living below the "poverty line", which is defined as 60% of median household income. As such even if everybody in the country were to start earning millions there would still be lots of people in poverty by that definition.

These "relative poverty" definitions looks weak to me when much the the world has genuine poverty with populations struggling to avoid malnutrition.

JohnRo

Don't just dismiss the relative cost of living. There are people going hungry in the UK too, homelessness is on the rise in a big way. No amount of criminalisation, ignoring or sweeping it under the carpet will make it disappear.

Thankfully we have cash strapped local authorities, charities, food banks, shelters and a national health service which help to bridge the gap for many.

It may not be this way in future.