Interest rates rising

gt94sss2

The government sets the Bank of England's  targets - they could just change them
Abolishing the inflation target been has been suggested: https://www.telegraph.co.uk/business/2020/05/30/rishi-sunak-should-scrap-bank-england-inflation-target-focus/

Zanderman

Afternoon said:

masonic said:

Afternoon said:

Aretnap said:

A couple of decades?

But I've already waited a decade.

What will it mean for you for interest rates to rise? For many it will be a bad thing.

There has to be a balance for savers and people in debt. People who have been in debt have benefited from these low rates so in theory should have sorted their position out by now. 

That's not a very good theory.  

Primarily because it assumes all debts are in the past - so ignores everyone currently in debt, or getting into debt.

There are always people in debt - so saying they should be out of it 'by now' ignores reality completely. 
Indeed, with the current situation - thousands of people losing jobs because of the Covid-19 crisis - the amount of debt is likely to be increasing massively, and the increase will continue long-term.

And, going back to your opening line ' 'there has to be balance for savers and people in debt'.  No, there doesn't!   Why should there be a balance?  This is the real world.  It's not a fair or balanced one.

I should say, for info, that I have no debt but do rely (to a small extent) on income from savings and so am, like you, very worried about ongoing low interest rates.  But I have no expectation of them rising anytime soon - not for 5-10 years minimum and I have no sense of entitlement to any 'balance'.  It's just life.

NorthernJoe

Our entire economy is based around debt. Debt is necessary for growth - be that corporate growth through investment, government growth (infrastructure & public services) or individual "growth" (better/bigger houses, cars, consumables) all of which benefit the economy. 

Higher interest rates discourage borrowing. Governments & central banks don't want to raise them for all those reasons. 

The only thing that I can see causing an interest rate rise is a period of sustained very high inflation but even then, high inflation is quite a nice way to erode some of the debt so don't expect rates to rise anytime soon. 

Sailtheworld

Interest rates have been trending downwards since the early nineties. The GFC and Coronavirus just happened to exacerbate the trend. When there's sustained wage growth interest rates might rise but that doesn't seem to be on the agenda anytime soon.

EdGasketTheSecond

Interest rates can never rise above about 2.2% now. There has been so much currency printing going on that the US and UK gov'ts cannot afford the interest on their debt if rates go above that. It is the un-announced policy of gov'ts to make thrifty savers pay for the gov'ts excess spending through inflation and hence reduce the real cost of gov't debt.

Thrugelmir

EdGasketTheSecond said:

Interest rates can never rise above about 2.2% now. There has been so much currency printing going on that the US and UK gov'ts cannot afford the interest on their debt if rates go above that. It is the un-announced policy of gov'ts to make thrifty savers pay for the gov'ts excess spending through inflation and hence reduce the real cost of gov't debt.

ECB is arguably in a far worse position. 

EdGasketTheSecond

Yes them too. In fact nearly all fiat currencies are in a race to debase.

MaxiRobriguez

Afternoon said:

Aretnap said:

A couple of decades?

But I've already waited a decade.

With respect, interest rate policy isn't going to consider individuals, and certainly not one specific person.

Personal and corporate debt levels are at record highs and raising interest rates would choke off any recovery for many businesses and put millions more out of work. We still need to tackle the debt though so I'd expect policy to try and stoke inflation instead, which means continued low interest rates. I'm sure the policymakers will be looking at deflation as a possible scenario as well and that will give further rise to keeping interest rates very low.

So, I agree with Aretnap - you'll have to wait even longer if you want to see a rise in interest rates. Alternatively if you have spare cash you could choose to invest it, if you have a long enough investing time horizon to ride any volatility, or you could pay back debts which have higher interest rates than you'd get in a bank or savings account.

Sorry if that's not what you want to hear but those are your likely choices for the foreseeable future. 

MaxiRobriguez

Gary1984 said:

But with the independence of the Bank of England would they not need to raise interest rates to stop inflation getting too high if needed? I accept the government would rather they didn't but how much can they lean on them?

Define "too high"?

Target is 2% but you'd probably find overshooting that for a couple of years would be gladly taken right about now. 

bowlhead99

EdGasketTheSecond said:

Yes them too. In fact nearly all fiat currencies are in a race to debase.

I know you have a bee in your bonnet about the topic, but presumably, you could drop your use of the word 'fiat' every time you say 'currency', because there aren't really such things as non-fiat currencies since the world developed a modern financial structure to support its economic growth. So you just mean 'currencies'.