Are we expecting BOE to remain at 4.75% on 8th February 2025?

lmitchell

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

Just don't cut interest rates at the same time.

Agreed. It's not inflationary whatsoever. As you say, reducing energy costs would enable producers to supply more cheaply, due to reduced overheads. Ensuring the producers do pass on those savings to the end user would be the biggest challenge.

Returning the additional National Insurance tax (1.25% hike) that Hunt scrapped would surely cover much of these costs. I think we could all stomach another 1.25% in tax if it meant inflation was slashed and interest rates returned to more sustainable, stable levels.

And I'd also agree that we'd need to let bank rate sit as is for the next 6 months while these energy cuts take effect.

MattMattMattUK

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Businesses reclaim the VAT on energy, it does not have a cost to them. 

lojo1000 said:

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

It would reduce the costs, but personal use of vehicle fuel vastly outstrips commercial usage, cutting it would be inflationary, making things worse. 

lojo1000 said:

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

The revenue drops would make a bad situation worse. The government us already running a huge deficit, borrowing exceeds 100% of GDP and borrowing costs have risen significantly, we now spend more on debt interest than we spend on education, policing and defence combined. Further increasing borrowing and debt servicing costs would make things worse. In fiscal terms it would also indicate an irresponsible attitude to debts on the international markets, further pushing up borrowing costs. 

lojo1000 said:

Just don't cut interest rates at the same time.

Interest rate cuts are unlikely for a while, probably another 2-5 rises first. 

RelievedSheff

Interest rates will keep rising. They are not going to just sit back and watch what happens.

lmitchell

RelievedSheff said:

Interest rates will keep rising. They are not going to just sit back and watch what happens.

Respectfully disagree. I think this 'shock' rise now is exactly because they do plan to sit back and allow the latest hikes take effect. I think we'll see 5.25 in August, followed by a pause until late autumn.

MattMattMattUK

lmitchell said:

RelievedSheff said:

Interest rates will keep rising. They are not going to just sit back and watch what happens.

Respectfully disagree. I think this 'shock' rise now is exactly because they do plan to sit back and allow the latest hikes take effect. I think we'll see 5.25 in August, followed by a pause until late autumn.

It was not a shock, regardless of the BBC headline, it was widely predicted for a month and nailed on after the inflation figures earlier in the week. 

Sarah1Mitty2

lmitchell said:

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

Just don't cut interest rates at the same time.

Agreed. It's not inflationary whatsoever. As you say, reducing energy costs would enable producers to supply more cheaply, due to reduced overheads. Ensuring the producers do pass on those savings to the end user would be the biggest challenge.

Returning the additional National Insurance tax (1.25% hike) that Hunt scrapped would surely cover much of these costs. I think we could all stomach another 1.25% in tax if it meant inflation was slashed and interest rates returned to more sustainable, stable levels.

And I'd also agree that we'd need to let bank rate sit as is for the next 6 months while these energy cuts take effect.

They are returning to more sustainable stable levels, it is because they were artificially held below those levels for so long that we are now in the present mess, the return to normal will unfortunately see people who overstretched unable to pay their debt though.

Sarah1Mitty2

RelievedSheff said:

Interest rates will keep rising. They are not going to just sit back and watch what happens.

I agree, a few central banks now seem to be committed to slaying the inflation monster, whatever it takes, unfortunately for the UK we started way too late and are now well behind the curve.

lmitchell

Sarah1Mitty2 said:

lmitchell said:

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

Just don't cut interest rates at the same time.

Agreed. It's not inflationary whatsoever. As you say, reducing energy costs would enable producers to supply more cheaply, due to reduced overheads. Ensuring the producers do pass on those savings to the end user would be the biggest challenge.

Returning the additional National Insurance tax (1.25% hike) that Hunt scrapped would surely cover much of these costs. I think we could all stomach another 1.25% in tax if it meant inflation was slashed and interest rates returned to more sustainable, stable levels.

And I'd also agree that we'd need to let bank rate sit as is for the next 6 months while these energy cuts take effect.

They are returning to more sustainable stable levels, it is because they were artificially held below those levels for so long that we are now in the present mess, the return to normal will unfortunately see people who overstretched unable to pay their debt though.

Sustainable, stable levels would be 3%+ - comfortable enough above 2% inflation target and still enough to give savers some returns. Consumer spending IS needed to grow the economy, whether you like it or not.

lojo1000

MattMattMattUK said:

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Businesses reclaim the VAT on energy, it does not have a cost to them. 

lojo1000 said:

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

It would reduce the costs, but personal use of vehicle fuel vastly outstrips commercial usage, cutting it would be inflationary, making things worse. 

lojo1000 said:

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

The revenue drops would make a bad situation worse. The government us already running a huge deficit, borrowing exceeds 100% of GDP and borrowing costs have risen significantly, we now spend more on debt interest than we spend on education, policing and defence combined. Further increasing borrowing and debt servicing costs would make things worse. In fiscal terms it would also indicate an irresponsible attitude to debts on the international markets, further pushing up borrowing costs. 

lojo1000 said:

Just don't cut interest rates at the same time.

Interest rate cuts are unlikely for a while, probably another 2-5 rises first. 

Small business below the limit/not registered do not reclaim VAT and small business makes up a significant part of the service economy but I take your point.

Agree re fuel duty - not sure how business could be targeted separately.

Anyway, not sure why i'm defending the supply side since I think the greater issue is demand side as well - i.e. there's too much money chasing too few goods.

My suggestion is not to allow leverage to purchase property on the secondary markets; i.e. only new builds can use leverage. Obvs would need to be phased in over time. And stop cutting rates every time there is a recession. Let prices find their own level and let markets clear. The inefficient businesses die and make way for the new/more efficient businesses.

Sarah1Mitty2

lmitchell said:

Sarah1Mitty2 said:

lmitchell said:

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

Just don't cut interest rates at the same time.

Agreed. It's not inflationary whatsoever. As you say, reducing energy costs would enable producers to supply more cheaply, due to reduced overheads. Ensuring the producers do pass on those savings to the end user would be the biggest challenge.

Returning the additional National Insurance tax (1.25% hike) that Hunt scrapped would surely cover much of these costs. I think we could all stomach another 1.25% in tax if it meant inflation was slashed and interest rates returned to more sustainable, stable levels.

And I'd also agree that we'd need to let bank rate sit as is for the next 6 months while these energy cuts take effect.

They are returning to more sustainable stable levels, it is because they were artificially held below those levels for so long that we are now in the present mess, the return to normal will unfortunately see people who overstretched unable to pay their debt though.

Sustainable, stable levels would be 3%+ - comfortable enough above 2% inflation target and still enough to give savers some returns. Consumer spending IS needed to grow the economy, whether you like it or not.

But the inflation is running at 4 times the target, at least, that is why those low rates are not sensible or sustainable! You seem to be thinking of what is comfortable for a mortgage debt holder rather than the economy as a whole (The BOE is looking at the whole economy)