Any thoughts on inflation?

DT2001

If I had longer to go on my mortgage and thought inflation and interest rates were going higher I’d fix for 5 years +. You are then paying back less in real terms.

I took a DB pension early and in less than 4 years it will have two GMP elements. So roughly a 1/3rd will no longer increase, a 1/3 rd will increase by CPI max 3% and 1/3 rd by RPI max 5%.
At the time of taking it part of the GMP was linked to SP and part to the DB. So higher inflation will have a greater impact on that part of my income.

As quite a few posters have said you have your own inflation and expenditure figures.
I hope to drop expenses by downsizing when children have finally flown the nest and will look for a plot to build a Passivehaus on.

No change to investment plans other than to hold less cash by investing more regularly rather than once a year.

[Deleted User]

Official numbers across western countries are well passed Central Banks” inflation targets.  The governments and central banks are still claiming its “transitory” but that claim is starting to wear thin.  They better start raising interest rates.  The longer they hold off, the higher they will go in the end. 

SouthCoastBoy

I think the BoE are hoping it is transitory, personally as like many people I think it is here to stay and has further to go. The problem is our economy has been built around rising house prices, many people have massive mortgages when compared to historical averages and a 1 or 2% rise in interest rates will have a major impact for those not on fixed rate deals. 

Bravepants

I hope the BoE does raise interest rates.

It would be a little unfair to protect those who have over-committed on their housing while the rest of us suffer higher inflation.

Perhaps it's an opportunity to reset house prices just a little.

michaels

Bravepants said:

I hope the BoE does raise interest rates.

It would be a little unfair to protect those who have over-committed on their housing while the rest of us suffer higher inflation.

Perhaps it's an opportunity to reset house prices just a little.

You'd have thought so - but it sounds like political suicide and possibly economic as so much of the economy is also driven by house price increase.

Plus the more inflation then can get through the system without a corresponding rise in the rate on gilts the sooner national debt becomes manageable as a share of GDP....leaves the BoE conflicted much

QrizB

michaels said:

Bravepants said:

I hope the BoE does raise interest rates.

It would be a little unfair to protect those who have over-committed on their housing while the rest of us suffer higher inflation.

Perhaps it's an opportunity to reset house prices just a little.

You'd have thought so - but it sounds like political suicide and possibly economic as so much of the economy is also driven by house price increase.
Plus the more inflation then can get through the system without a corresponding rise in the rate on gilts the sooner national debt becomes manageable as a share of GDP....leaves the BoE conflicted much

Oh, let's just have a month or two at 12%, just to see what effect it has on the newspaper headlines. I'll let them change it back afterwards

sevenhills

michaels said:

You'd have thought so - but it sounds like political suicide and possibly economic as so much of the economy is also driven by house price increase.

Plus the more inflation then can get through the system without a corresponding rise in the rate on gilts the sooner national debt becomes manageable as a share of GDP....leaves the BoE conflicted much

I always thought that the setting of interest rates was political, but yet interest rates are set by the independent Bank of England.

I don't believe economists agree on low interest rates being a good idea, but they may be needed for a weak economy.

I am on a fixed rate, perhaps those on a flexi-rate mortgages have a bias towards low-interest rates being kept?

Retireinten

In my view there's your own personal inflation, as many have said, which is very much determined by your personal spending habits, and most likely very different to CPI. 

Council tax has been increasing above inflation for years where I live so nothing new there, we spend very little on fuel (maybe £50 a month) and we have a large solar system that keeps our gas and electric close to £100  a month for a decent sized 4 bed detached. No mortgage so no impact on us if interest rates do increase. 

But there's also lifestyle inflation, which I think is our biggest downfall in this household (our food and 'fritter' spend is horrifying). And yes I do appreciate this isn't genuine inflation but it is something that is very much controllable unless you live hand to mouth already.  I reckon if I get to grips with this I will recover any extra costs due to inflation AND make a blumin' good saving on top. 


In respect of retirement saving, while we're earning the money there will be no change to our savings rate or retirement plans, unless the market takes a real hit. We have one good DB pension between us that increases with CPI and this plus 2 x state pensions covers our needs from 67/68 onwards, so I'm hoping we're not as exposed as some.

Thrugelmir

SouthCoastBoy said:

I think the BoE are hoping it is transitory, personally as like many people I think it is here to stay and has further to go. The problem is our economy has been built around rising house prices, many people have massive mortgages when compared to historical averages and a 1 or 2% rise in interest rates will have a major impact for those not on fixed rate deals. 

Inflation is viewed as being persistant. Going to take 18-24 months for the effects of the pandemic to unwind globally.  

[Deleted User]

sevenhills said:

michaels said:

You'd have thought so - but it sounds like political suicide and possibly economic as so much of the economy is also driven by house price increase.

Plus the more inflation then can get through the system without a corresponding rise in the rate on gilts the sooner national debt becomes manageable as a share of GDP....leaves the BoE conflicted much

I always thought that the setting of interest rates was political, but yet interest rates are set by the independent Bank of England.

Independence can be undermined by politicians.  Politicians appoint governor for the Bank of England.  Politicians can change inflation targets or put pressure.  

In the US Trump routinely bullied the Feds to lower interest rates.   And then politicians changed inflation targets and said interest rates should promote equality, fight climate change and god knows what else the bankers know nothing about.