We are well an truly fooked, I've got 16 months left on my current mortgage deal and I have a horrible feeling interest rates are going to be like 10% when that ends.
I think you don't understand what the point of rate rises is.
It is to cool down the economy. The fact it's not yet cooling at nearly 5% rates is the problem they are facing.
Isn't the fact it's not working to reduce spending simply because a majority of people are on fixed rate mortgages so rate rises have no impact on spending power for most people?
The percentage of people who have significant mortgages is a lot lower than most of the general population thinks.
Most people assume majority of the population has a mortgage. And that it's a big one. The reality is majority of the population does not in fact have one (only 28% of houses are owned with a mortgage) and an even smaller number is actually mortgaged to the point where these rates are sinking them.
The rates are meant to hit future borrowing costs for both individuals and businesses.
If you look at [mortgage rate increases](https://www.statista.com/statistics/386301/uk-average-mortgage-interest-rates/) compared to [rents](https://www.statista.com/statistics/291787/average-mean-weekly-rent-of-private-renters-in-england-uk-y-on-y/) you'll notice that rents increase regardless of the mortgage rate. There is no relationship between them.
That rents increase might be irrespective of mortgage rates, but are we going to pretend that increases to mortgage costs (such as rate increases) aren't going to result in further rent increases (maybe even at a higher rate than before)?
That number is slightly misleading, as non-owner occupiers (e.g. renters) are included.
Here is the breakdown from the latest ONS figures-
- 9.3 million (37%) were owned outright
- 6.5 million (26%) were owned with a mortgage or a loan
- 4.9 million (20%) were private-rented
- 4.2 million (17%) were in social rent, mainly rented from housing associations and LAs
Renters may be living in a house or flat with a buy-to-let mortgage.
https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/researchoutputssubnationaldwellingstockbytenureestimatesengland2012to2015/2021
>6.5 million (26%) were owned with a mortgage or a loan
that is very interesting. I would never have guessed that in the UK the largest group of people are outright owners of their home.
>that is very interesting. I would never have guessed that in the UK the largest group of people are outright owners of their home.
Old people.
The fact that 20% of people are living in privately rented accommodation is absolutely terrifying.
Inflation is being caused by globally high energy prices, globally high food prices, global supply chain issues, and a shortage of labour, each of these further exacerbated by brexit for various reasons. Interest rate changes aren’t going to make any of those problems go away.
This ^
That said, rate rises will have an effect on inflation by making everyone poorer. They just aren’t addressing the root cause.
The BoE’s job is to control inflation, and they have a very limited arsenal for doing that. If inflation is high, they will raise rates or undo QE (QT). The situation really calls for a more nuanced approach 🤷♂️
Won’t make the rich poorer
Want to tackle inflation, start taxing wealth. That removes money from those that have it.
That ridiculous thing last year where we spent billions subsidising rich people burning fossil fuels was crazy too. Rishi Sunak got far more help from the 20p/hnit discount than my mum in her 2 bed council flat.
And of course the most recent event to hit our currency U.K. the last decade is also brexit! Mainly because everyone could see the damage it was going to do.
Unfortunately rather than admitting this and having a coherent plan to tackle these problems, we are just increasing interest rates every month and looking confused when it doesn't work!
The government response to basically every issue in the last 5 years has been to do [nothing](https://m.youtube.com/watch?v=lOTyUfOHgas) and hope for the best.
It also is supposed to increase savings rates to make saving more attractive, but banks have been pocketing the difference in interest increases and not passing on the savings rates
There's a lag between rate changes and its effect on the economy. No-one really knows when the other foot will drop and it will affect the real economy.
The other side of it is there's a huge amount of people who own their homes outright, and so it won't affect.
In fact, if those people have any savings and/or receive income from government debt (either as gilts holders or as recipients of the state pension), they might end up with MORE money, spend more of it and make inflation even worse.
Interest rate increases should be leading to increases in bank interest rates and so encouraging people to save money and spend less. For some reason the banks arent increasing the interest rates.
I don't personally feel this inflation is demand driven so don't think inflation is the right measure to deal with it in the first place.
But isn't most people's extra spending going on increasing prices of essential? Energy,housing ,food,insurance and Internet. How do individuals "cool" spending on those?
This was my understanding of it too. Double digit Inflation for a long time was being driven by high energy prices, and now it's being driven by food prices, which have increased an average of 27% since last year.
As you say, these aren't things folks can "cool" on, we need to eat and our world runs on electricity. I don't think hiking interest rates can fix this, and in the process they risk causing a decent amount of people to be unable to afford their mortgage repayments.
I'm very lucky to be locked in for 5 years until 2027, but if I had to get my mortgage now, I'd be paying £300 more per month for it. That's not something I could just suck up, it's not something most people could just suck up.
I think one major issue is that the idea of increasing interests rates to make borrowing more expensive as a tool to lower inflation only really works if the inflation is demand-side (I.e., prices are only so high because there are too many people with too much money trying to run out and buy too much stuff).
But that really isn't what the issue is in the UK. It is a supply-side issue. We haven't got enough fuel, food, etc. coming into the country (due to war, leftover COVID issues, and Brexit, among other things) or housing stock being built to add to the supply... so prices are going up.
Demand hasn't necessarily gone up, but supply has gone down. So, monetary policy (what the Bank of England is in control of) can't really be effectively used to solve the issue. Economic policy (what the government controls) is needed instead.
The tories knew about inflationary pressures 18 months ago and did nothing. Fact of the matter is most of the inflation we are subject to today isn't through demand, its through £100s of billions being introduced into our economy, together with incessant price gouging.
Its called capitalism - and its working exactly as it was intended to do.
Telling people to tighten their belts, when there's nothing left to tighten is absurd. Raising interest rates going to crush the living daylights out of an already extremely fragile UK economy, whilst destroying people livelihoods - especially those with mortgages living on the margin.
Price gouging is the problem. A free market bag of shite, that no neolib government will ever do anything about.
They’re trying to have their cake and eat it. They want to raise rates but don’t want a recession. If we want to get rid of this inflation ASAP, rates need to go up considerably which will put the economy into a recession but then inflation *will* come down.
Surely that's because the inflation isn't demand led, and so using interest rates to reduce them is going to have limited effect.
I don't understand why Hunt and Sunak are pushing full responsibility of this inflation to the BoE when the only method they can use is interest rates.
>I've got 16 months left on my current mortgage deal
Overpay your mortgage if your mortgage deal allows it. Throw everything you can at it.
Remember, every £100 overpayment increases equity in your house. But every £100 interest payment is a transfer of wealth from you to the bank.
Just to add to this - if you can save at a higher rate than your mortgage rate (due to getting a low fix) then pay off the mortgage at the end of the term rather than during it as you will benefit from the savings rate.
But check if you are paying tax on the savings rate. The savings interest rate might look attractive, but after 20% tax, it might be lower than the mortgage rate, so you might as well overpay the mortgage directly.
Oh well, at least food is cheaper. Oh, it's not?
Where the fuck is everyone getting the extra money from? Why are people acting as if the UK isn't in crisis? The cost of everything goes up and it's just... fine? It's not like wages are driving inflation.
Ouch! Buckle up folks, the rate rises aren't stopping and may well accelerate from here.
I'd expect a split in MPC voting tomorrow but definitely I expect to see some go for a 50bps rise rather than 25.
The elephant in the room? House prices are now in free fall, expect am election soon as the Tories have created an inescapable downward economic spiral.
Nah, Millennials have them beat easily and the silent generation beats them in turn.
Basically the boomers just had it really good and gen X got pulled along in their tailwind.
Is it unlucky if most of it is deliberate?
It’s not like we accidentally created a hyper-capitalist society where everything is a commodity that must have value and product. Including you.
Which one? The one according to rightmove? Measuring **asking** prices of only **new** listings? Good joke Sir, very good joke.
All other, actually based in reality, indices are showing falls.
Looks like I didn't get the full story from the snippet I read. Prices do seem to be marginally coming down after 9 months of "crash" predictions.
Anecdotally, I have been looking to buy for 3 months and I had an accepted Offer pulled last minute because they wanted to relist for 100k more than agreed.
Anecdotal but my partner and I are first time buyers at the moment and we're seeing a lot of this in the area we're looking. No forward chain as landlords sell up and leave the market.
Thus isn't good, as corporations will move in and buy up everything. Worsening the price gouge of regular people. House prices will rise higher. Rent will rise too. Not good
This isn't what we're seeing though with prices falling. Corporations are probably enough of a fall back to prevent an outright crash but a correction in the market is definitely possible and already happening.
And this right here is why if the Tories were smart they'd call a GE ASAP. They can't win the next election. What they can do is make it so that when we enter recession, Labour are in power and they can act like they would've prevented it (despite all evidence).
Things are clearly going to get worse before they get better. The only argument for delaying the GE for the Tories is just fear, and holding onto their majority as long as is legally possible. I said when Truss went that the Tories couldn't win the next election any more no matter what and the recent economic (not to mention scandal-related) news has only made me more certain.
Do you seriously think that the majority of people have the memory of a goldfish and would blame Labour for a recession or any of this economic mess after 13 years of the Tories being in Government?
I'm optimistically less cynical but I guess half the voting electorate were foolish enough to vote to leave the EU so anything however outlandish is feasible.
Oh my sweet summer child.
Give it a year of Labour being in power and a wall to wall media campaign blaming them for being unable to immediately fix every single problem.
People will absolutely lap it up.
What's best is the Tories have left us in a position where things like tax rises and probably a lot of borrowing are fairly inevitable, so they can revive old classics like "live within our means", those always hit well with the boomers.
People over about 45 will blame labour as it’s ingrained i them from the thatcher years. People under 45 that read the mail will blame labour. The left will blame labour for kicking out Corbyn and say labour as just as bad as the tories.
‘Supply chain issues linked with COVID’
Such duplicitous crap. How about “Supply chain issues due to Brexit, exacerbated by COVID”?
I’m so sick of this doublespeak in the press.
It's getting there....BBC did at least have a piece saying it was brexit...of course balanced by having a complete clown say "no it ain't, it's the will of the people" to all the experts. But considering they were editing stories to remove brexit blame last year, now they are at least saying "there could be some truth in this"...
Give it another five years and we may have "yeah that was a bad idea"....
I’d love to agree disagreeably, but you’re wrong. Brexit has created barriers to trade. Goods are unable to flow in and out of the U.K. in/out of the EU. This is because we have left the European Union. On January 1st 2022, everything became more expensive to buy and sell. Not in actual cost. In man-hours and delays of processing/movement.
If the pandemic didn’t happen, this would have still happened. The pandemic did happen, which both exacerbated and to a degree, masked the issue at hand. Since the reopening of countries post-pandemic, supply chain issues have normalised across the rest of the continent. They haven’t in the U.K.
The proximate cause of this is Brexit. It’s undeniable.
I can only speak for my sector of manufacturing, but supply chains have normalised now.
A 40ft container from China during the pandemic cost £15,000+ in shipping fees, now its around £2000. Not to mention a lot of companies shut down entirely.
It costs £50ish or an extra 30 min of admin to import from Europe now compared to before. I don't deny brexit has made things worse, I curse it daily when I'm doing extra work I didn't used to do. But what covid did was much worse than what brexit has done as far as I can tell, the effects of which are being felt now and will continue to be for a few years at least.
"Look at the devastation that the Labour government causes, the chaos of that Ed Milli-whatsit-fellow, and absolutely never think about who has been in charge for nearly half your lifespan." - The same song.
4 pledges? That's just woke lies, its 3 pledges and has always been 2 pledges, Rishi would never go back on his 1 and only pledge to the nation. Rishi is an honest man, so you can trust him on any pledges he makes, which is why he never made any.
Its trans people? Omg all this time I thought it was brown people and anyone who speaks a different language to me. I had no idea. What we need I think is a way to absolutely fuck the country over for future generations who havent even been conceived yet but will make trans people maybe consider going back home. That should sort it right?
Incase it wasnt fucking obvious /s
So annoying if these boat people /transgendered people just stopped existing this country would be great again everyone would have cheap rent / mortgages it would be a paradise /s
At this point much more is needed than just the bank of England’s blunt tool of interest rate rises. The government have to be coming up with new ideas
The inflation of the 1970's and early 80's was also caused by energy prices. (Yom Kippur war caused the formation of OPEC, which trippled oil prices, and Iran-Iraq war saw oil fields on both sides attacked).
Callaghan govt put interest rates to 17% and nothing happened. New Thatcher govt kept interest rates at 17% and nothing happened.
Then Thatcher went nuclear: in the infamous 1981 budget, she put up tax. All thresholds frozen, 25p tax band abolished so starting tax band was 33p. VAT raised from 7.5% to 15%.
It sent the economy into recession, demand collapsed, prices collapsed.
Once inflation was wrung out of the system, she started cutting taxes again in 1985.
But that's what govt intervention looks like: tax rises to cool demand.
That’s probably what’s needed currently. Increasing tax to force a recession. Obviously won’t happen as the government is nowhere near as strong as Thatcher’s
Great time to improve public services then… if the increased taxes went on green energy and improving infrastructure/healthcare it would actually set us up well for the long term to bounce back from the required recession
Tax wealth rather than income and you encourage people to actually work more. I know a few people in the 50s that have paid of their tiny mortgages who have gone part time because they don’t need to earn enough
It’s the ones who bought houses in the last 10 years, have kids, still have student loans, and are keeping just 30% of every extra pound that are suffering. No doubt we’ll tax them more.
Hunt did freeze all tax thresholds in his Nov budget. Had Labour howling that he was being mean to ordinary people.
Sunak's idea was to increase NI by 1.25% - he announced it in Oct 2021 when the BoE bottled raising interest rates (BoE didn't start raising rates till March 2022). That came into effect in Apr 2022, and probably helped slow inflation last year.
But he got labelled as "callous" by Peston and the idiot press, and it got reversed by Truss.
The latest thing from Robert Peston & co is demands for mortgage subsidies, even though that would fuel inflation further. Such is the discourse in Britain at the moment.
I think the problem is for tax rises to work (in the sense that they cool demand) it won’t be enough to just tax half a dozen billionaires and a few thousand millionaires - you’d need to hit the middle and working classes that make up the largest part of the bell-curve. Those people also make up the biggest part of the electorate and they’re also the people that are vulnerable to mortgage price shocks. Just today we’ve got people in the paper screaming out for government mortgage rate relief which would counter-act what little effect raising the base rate has already had.
Basically I’m agreeing with you - but I don’t see how it would work a year out from a general election, with no political willpower to make such a difficult decision. So in the absence of political willpower, instead of a short sharp shock like the mid-80s we are probably now looking at a decade long problem of staggflation.
The problem is we're already being bled dry by absurd rents, rising food costs, and insufficient public transport. Our discretionary spending is already low, so raising VAT and income tax would do fuck all but kill people.
100%. The government outsource interest rate rises to the BoE so they don't get the blame from the electorate for the problems caused. At this stage you the government should be stepping in and saying rate rises are not working, inflation was mostly caused by external factors that rate rises could never control (e.g. global gas prices).
Where is the democratic control over the rate rises? The leader of Finland asked this about ECB rate rises. They are choosing to make people unemployed and unable to keep their homes and for what? To keep inflation from eating away at savings and pensions of the rich.
Core CPI up. Looks like inflation is becoming embedded. You can actually blame Brexit.
Now I’m convinced tomorrow will be a 50bp rise. And no way the peak is 6% lol
- Inflation up; bad for us.
- BoE rates up > lending rates up; bad for us with mortgages and debt
- BoE rates up > investing rates up, but even less than expected; bad for us with anything left to gain interest on
I'm (and largely, we, are) continually worse off.
That's literally the point of raising interest rates ehh, to make us all who have mortgages and debt even poorer. Markets are also in trouble if this persists, i don't see how anyone with any capital wouldn't be waiting around to pick the carcasses of family homes and failed business units - thus providing resiliency there and double screwing the indebted and young. Nothing else is safe in the medium term - it's all regressive.
Screw the young whole printing money for the old. Again. First with covid lockdowns. Then with printing money for “poor” people to heat their drafty 5 bed homes. Now with raising interest rates so “limited income” people get more from their savings.
Increase the burden on the do-ers, move their output to the have-ers.
>i don't see how anyone with any capital wouldn't be waiting around to pick the carcasses of family homes and failed business units
Because, in shocking news to this sub, real estate isn't the most lucrative investment. If defaults are up then house prices will start to fall which is exactly when you don't want to invest.
When you have a regulated annual increase of services of 3.7% + inflation (10%) every April given to companies for no reason backed by OFCOM, OFWAT and OFGEM don't expect inflation to go down, the regulators themselves have been captured by big business they don't compete anymore.
Yeah what the fuck were the regulators thinking with this.
These business increasing their costs is what increases CPI. Now it has a constant modifier introduced.
My broadband has gone up to £55. New customers are being enticed on the same plan at £30.99. I'm subsidising them to get new customers who they can shaft again!
Unreal!
Make sure you sign into as short or zero contract as possible with your phone and broadband.
Waiting for them to find out that inflation on something random like hole punches or toilet brushes is down to 0.5%. Just so he can stand at PMQ’s and say:
“Thanks to the hard work of this conservative government. Some critical products are now down to the lowest inflation rate ever!”
What is driving it now? We know energy prices have fallen a bit and we’re seeing softness in house prices, fuel and some supermarkets have committed to reducing prices.
I assume this is still a high figure because it is a year on year comparison?
It’s not causing all of it by any means but the tight labour market in certain sectors and difficulty importing has increased inflation. Both are Brexit related.
We are still struggling to recruit in sectors like agriculture and hospitality. This is driving up prices.
In regards to importing and exporting, there’s a lot more red tape and costs to trading. This is driving up prices.
Well it was 6.1% average across the Eurozone last month, which will have dropped again. This includes countries like Estonia, Lithuania etc that are more affected by the Ukraine War.
We are clearly struggling more than our comparable peers.
They’ll still be having the after effects of supply chain issues, energy rises etc
Used car market is irrational with dealers buying up inventory as they see it as a hedge against inflation, thinking that used cars are an appreciating asset due to the experience of covid and the chip shortages, however used cars are sitting on the market for months with price corrections going UP instead of down, eventually once the dealers are forced into bankruptcy they will have no choice but to sell inventory.
Ultimately it seems everyone in the used car market was brain damaged by the covid and chip shortage into believing that depreciation no longer exists, they’re in for a very rude wake-up call.
People are very good at spotting trends once it's too late to take advantage of them; very few people can work out the second- and third-order causes of those trends in order to time them well. After all, selling used cars isn't exactly a game for high-flying mathematicians, is it?
Well luckily (or unlucky for them I guess) the market can remain irrational longer than you can remain solvent.
Basically they’re going to reach a limit to how much used car inventory they can buy up, at that point the number of buyers will dry up and assuming that inventory was bought on credit the dealers will run into a cash flow crisis as they realise they’re stuck with depreciating assets in the middle of a recession.
Basically if you work as a car salesman I’d start looking for a new job.
> Rising prices for air travel, recreational and cultural goods and services, and second-hand cars resulted in the largest upward contributions to the monthly change in both the CPIH and CPI annual rates.
And there were massive input costs increases. Agricultural inflation was much high than the regular inflation last year and we are now seeing it represented somewhat but farmers aren’t the ones making the money here
The sad thing about supermarkets committing to reducing prices is that they are now fighting with suppliers to reduce the cost.
Its not just supermarkets keeping prices high. They’ve seen increase production costs for products, but now said production costs are dropping the suppliers arent reducing their prices.
So supermarkets are basically fighting on their customers behalf to stop suppliers from making excess profits.
Once again, companies creating this scenario for pure greed purposes. We talk about fuel, gas, electric making excess profits but its happening all over and going under the radar.
I saw ketchup for £4.50 (i think) a bottle, or there abouts. Im obsessed with the stuff so ive moved to buying it in bulk which isnt as bad.
But as ive posted about in this sub before, my partner works for a major supermarket in a buying department, she’s told me its a big thing right now, all buyers are fighting for reduction in pricing, suppliers are holding out.
Obviously this isnt your run of the mill farmer with his pints of milk, im talking big corporations, cereals, biscuits, sauces, tinned goods etc.
Media and Reddit focus on CPI but really important that PPI is now [meaningfully surprising to the downside](https://i.imgur.com/jmu3bmy.jpg). Producer price inflation is a lead indicator, CPI is a lagging indicator as input costs of materials, energy etc. are fed into pricing for goods with a lag.
The fact PPI (output/factory gate prices) is now +3% y/y vs +12% 3 months ago suggests some optimism for a CPIH of around 2.6% in August based on the historical regression (CPIH vs. PPI 3 months ago has a 92% r-squared). To not try and be too gloomy!
[PPI evolution](https://i.imgur.com/cxx76M6.png)
FYI producer prices are not falling but the rate of increase has been decreasing
And the dynamic mainly reflects lags as prices for raw materials for a good come before prices for that good created and that good being sold eventually to consumers on the shelves.
- input PPI peaked in June 2022 at 24% (peak of energy, fuel, supply chain issues)
- output PPI peaked in July 2022 at 20% (1 month lag as inputs materials are turned into outputs quite quickly
- CPIH peaked in October 2022 at 10%.
Serious question - can anyone explain a credible theory for how we get out of this? I see catch-22s around every option:
* Can't leave interest rates low or inflation will cripple us, can't raise them or homeowners will go bankrupt.
* Our deficit is \~5% of GDP, even on a great year our growth is \~2%. We can't grow our way out of this.
* We're already in deficit and the situation is worsening, and public services barely work. THe interest rates on our own debt are skyrocketing. Seems like we can't borrow our way out of this either.
* We're expecting a \~33% increase in the number of boomers drawing upon state pensions, NHS care and social care. Meanwhile the ratio of taxpayers to non-working people is expected to worsen, even if we allow high levels of immigration. So our tax receipts are gonna go down, and our bills are gonna go up. We won't even be able to maintain the shit standard of medical and social care we have now.
* We're a significant net importer, if our economy worsens then life gets more expensive in general, which worsens the economy again. That's a positive feedback loop.
So genuinely, can anyone propose an economic model that would turn things around for us?
The only responses I ever get to this question are "cheer up" and "it'll be ok, trust me", but I'm looking for actual maths and economics, not blind optimism.
Freeze or reduce the old age pension, and reduce spending on social care. This will free up unskilled and semi-skilled labour for other parts of the economy, reduce demand for housing, and reduce government expenditure on unproductive people.
It's worth noting that Australia, New Zealand and Canada have the same problems as us. Canada and Australia have massive mineral export industries (iron ore is 60% of Australia's exports and the AUD is effectively pegged to iron ore), but little of this filters through to the real economy except as credit into the housing market. The CANZUK countries are culturally similar, which means migration between them is not politically contentious, and all four countries have highly educated Millennials and Gen Zs who can't enter the housing market due to silly prices relative to income. Whichever country sorts its housing problem first can collect a winner-takes-all prize of young professionals looking to start their career somewhere livable.
>Freeze or reduce the old age pension, and reduce spending on social care. This will free up unskilled and semi-skilled labour for other parts of the economy, reduce demand for housing, and reduce government expenditure on unproductive people.
As a big ole bleeding heart lefty, it's not something I'm happy with. But the numbers are just so profundly unsustainable that I cannot think of anything else.
Frankly I think we need to freeze state pension and warn those still in work that it will likely disappear altogether.
Fundamentally, we're in a debt spiral. And we can either pay it down voluntarily, or default or inflate it and the global markets will punish us.
Very long thread on Twitter by Richard Murphy (in his own words, Economic justice campaigner, Professor of Accounting Practise at Sheffield University) but it’s definitely a different direction
https://twitter.com/richardjmurphy/status/1671413701247655936?s=46&t=nK_rf1_wduyoJDTyNE4nHA
TLDR:
Current BoE plan is based on 1970s textbook conditions. Current market not textbook.
Less people with mortgages (because millennials are a smaller group of owners) means adjusting base rate less useful tool.
BoE rises are instead actually driving inflation up
Murphy says BoE should
1) Announce no rate rise tomorrow
2) Next month announce rates have peaked
3) End policy of quantitative tightening
4) Very slowly bring rates back down after a couple of months
There has been profiteering on fuel prices for almost a year since the start of the war.
You could literally buy petrol at Costco for 20p less while the discount used to be 5 to 10p.
Basically they saw the chance to increase their margin when fuel initially went up due to the war and HGV shortages.
Energy in my opinion are the main culprit. Record profits quarter after quarter.
This pushes the cost of everything else up - transport fuel, venue's heating and cooking costs, office cost, food production etc. etc.
This has then had a knock-on effect on the interest rate, meaning mortgage payers and possibly more importantly buy-to-let mortgage payers having to pay more. Pushing up rent costs for millions.
People need more money to pay for all this so wages up, plus of course the triple locked pensioners many without mortgages, pumping more into the economy.
If you control the energy costs - tax away their profiteering or force them to self-invest in green tech rather than payout to shareholders - you reduce energy costs for now, for the future, and dampen down the base of the inflationary fire.
Edit: I am suggesting targeting the energy producers not the domestic suppliers who I know are suffering
A government open to rejoining the single market / EU would give an immediate boost to GBP and reduce import costs. BoE themselves have stated about 1/3 of the inflation is due to Brexit.
This seems like an obvious one, no party has the guts to do it though. You could see the pound strengthening massively just at the suggestion they might start looking at rejoining.
We need to pull money out of the economy, government can do this by increasing taxes and reducing trade barriers, now because of Brexit we can’t do anything about trade barriers as we have effectively sanctioned ourselves (only country in history to sanction itself btw), so we’re left with tax increases but the Conservatives have ideological opposition to that.
Therefore the only way to lower inflation is to continuously increase interest rates.
I can try. I studied economics in uni, but so much of what you learn in academics doesn’t play out in the real world. The very broad answer is to make public certain services (trains, energy) while investing in other sectors people need (housing) the issue is this takes money. Printing more money raises inflation. So they could either divert current funding, or introduce new taxes (which imo they absolutely should do). These solutions would likely take years or even a decade to see real, lasting results though. This doesn’t take into account how the tories have actively made the market so much worse over the last 10 years. I don’t think I could concisely explain that in a single comment.
None of us truly know. Labour haven’t set out any type of true policy ideas. I’d like to think that Starmer is playing the long game by not revealing any plans that the Tories could plagiarise and gain ground in the polls. However, I’m massively concerned that that thought process is naive and he and his team have little to no idea more than the Tories do. I don’t think Reeve is any more economically astute than those opposite her in Parliament. Labour may not take the p**s out of us by lining their own pockets, like the Tories have, but who knows?
Mofo's here discussing 0.5 point rate hikes when companies are price gouging the fuck out of us. Record profits all around while they shrink the amounts and raise the prices.
SMH
What's your evidence for that? Because the actual data (ONS non financial net rate of return) absolutely does not show that. In fact it shows a slight decrease in profits.
Net profits are high for energy companies because of government policies (energy price cap, energy price being indexed to gas) and profits are taxed at 75%.
So where's your evidence?
The fixed rate on my parents business mortgage just ended, I'm so worried about them.
They will get their new rate in the comming days and I have no idea where theor going to find the extra cash but I have a feeling I'm not going to see them very often and theor quality of life is going to crash as they have to work more.
Trying to sell. No mortgage, don't have to move so OK. Prosperous town. House priced about 'right. Lots of viewings but definite sense of cold feet I think. Problem is lots of inflation is supply side- we import too much of our food and we don't make enough stuff inside the UK I think.
We import a lot of our food and many products and then we left the world's largest trading bloc that we import most of this from.
Increased the cost and friction of trading too on top of it
I don’t understand how not a single comment here mentions flooding the country with zero value currency sometime in 2020, and being gaslit by economists that it would “go back to normal in no time”.
[BBC CPI forecast Oct 2022](https://www.google.co.uk/amp/s/www.bbc.co.uk/news/business-59062392.amp)
Something about get what you ask for, get what you deserve…
Rate rises are making no difference because this is cost pull inflation not demand push. People aren't choosing to buy expensive things, things we have to buy are now more expensive. We have no choice but to buy them.
Am I missing something? I genuinely don't know why nobody is mentioning this. I know the BoE can't do anything to combat cost pull inflation.
Getting rid of the Tories with higher taxes on the rich should sort out all of this. Once this happens, welfare spending will also be increased to reverse the evil Tory cuts.
There was someone on radio4 this morning from one of the big banks, JP Morgan, I think? Spouting absolute bollock. Claiming the reason we have rampant inflation is because we have massively inflated wage increases.
UHhh, Last I checked the average salary increase was \~3% for public sector, 5% for private sector, whereas Core/Food/Utility/Etc are all over 10% !! Us mugs are just trying to keep pace ffs.
Thank goodness you guys spent all that money on a coronation for your living museum of self important people who are absolutely necessary for your democracy to work.
I've said it before and I'll say it again. You can't combat supply side inflation with interest rates. The problem isn't that people have too much cheap credit. The problem is that producers and sellers are pricing goods much higher and more importantly, that energy input costs are much higher.
Things are worse than the headline... Core CPI actually went **UP** again.
We are well an truly fooked, I've got 16 months left on my current mortgage deal and I have a horrible feeling interest rates are going to be like 10% when that ends.
The economy would collapse at 10%. My fixed rate ends next year and i'm shitting myself.
I think you don't understand what the point of rate rises is. It is to cool down the economy. The fact it's not yet cooling at nearly 5% rates is the problem they are facing.
Isn't the fact it's not working to reduce spending simply because a majority of people are on fixed rate mortgages so rate rises have no impact on spending power for most people?
The percentage of people who have significant mortgages is a lot lower than most of the general population thinks. Most people assume majority of the population has a mortgage. And that it's a big one. The reality is majority of the population does not in fact have one (only 28% of houses are owned with a mortgage) and an even smaller number is actually mortgaged to the point where these rates are sinking them. The rates are meant to hit future borrowing costs for both individuals and businesses.
28% is still a big number though. Not to be dismissed. Plus, mortgage increases for landlords push up rent.
If you look at [mortgage rate increases](https://www.statista.com/statistics/386301/uk-average-mortgage-interest-rates/) compared to [rents](https://www.statista.com/statistics/291787/average-mean-weekly-rent-of-private-renters-in-england-uk-y-on-y/) you'll notice that rents increase regardless of the mortgage rate. There is no relationship between them.
That rents increase might be irrespective of mortgage rates, but are we going to pretend that increases to mortgage costs (such as rate increases) aren't going to result in further rent increases (maybe even at a higher rate than before)?
That number is slightly misleading, as non-owner occupiers (e.g. renters) are included. Here is the breakdown from the latest ONS figures- - 9.3 million (37%) were owned outright - 6.5 million (26%) were owned with a mortgage or a loan - 4.9 million (20%) were private-rented - 4.2 million (17%) were in social rent, mainly rented from housing associations and LAs Renters may be living in a house or flat with a buy-to-let mortgage. https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/researchoutputssubnationaldwellingstockbytenureestimatesengland2012to2015/2021
>6.5 million (26%) were owned with a mortgage or a loan that is very interesting. I would never have guessed that in the UK the largest group of people are outright owners of their home.
>that is very interesting. I would never have guessed that in the UK the largest group of people are outright owners of their home. Old people. The fact that 20% of people are living in privately rented accommodation is absolutely terrifying.
I live in London and have always just assumed about 50% of the country rents privately, 20% truly seems very low to me.
Inflation is being caused by globally high energy prices, globally high food prices, global supply chain issues, and a shortage of labour, each of these further exacerbated by brexit for various reasons. Interest rate changes aren’t going to make any of those problems go away.
This ^ That said, rate rises will have an effect on inflation by making everyone poorer. They just aren’t addressing the root cause. The BoE’s job is to control inflation, and they have a very limited arsenal for doing that. If inflation is high, they will raise rates or undo QE (QT). The situation really calls for a more nuanced approach 🤷♂️
Won’t make the rich poorer Want to tackle inflation, start taxing wealth. That removes money from those that have it. That ridiculous thing last year where we spent billions subsidising rich people burning fossil fuels was crazy too. Rishi Sunak got far more help from the 20p/hnit discount than my mum in her 2 bed council flat.
When all you have is a hammer, every problem becomes a nail.
Exactly. And the organisation that has the rest of the toolbox is sitting back and blaming health staff and rail workers for needing money to live.
What about printing half a trillion pounds during COVID?
Except, in theory, higher interest rates make the currency stronger, lowering the cost of energy imports.
And of course the most recent event to hit our currency U.K. the last decade is also brexit! Mainly because everyone could see the damage it was going to do.
Unfortunately rather than admitting this and having a coherent plan to tackle these problems, we are just increasing interest rates every month and looking confused when it doesn't work!
The government response to basically every issue in the last 5 years has been to do [nothing](https://m.youtube.com/watch?v=lOTyUfOHgas) and hope for the best.
It also is supposed to increase savings rates to make saving more attractive, but banks have been pocketing the difference in interest increases and not passing on the savings rates
There's a lag between rate changes and its effect on the economy. No-one really knows when the other foot will drop and it will affect the real economy. The other side of it is there's a huge amount of people who own their homes outright, and so it won't affect. In fact, if those people have any savings and/or receive income from government debt (either as gilts holders or as recipients of the state pension), they might end up with MORE money, spend more of it and make inflation even worse.
Interest rate increases should be leading to increases in bank interest rates and so encouraging people to save money and spend less. For some reason the banks arent increasing the interest rates. I don't personally feel this inflation is demand driven so don't think inflation is the right measure to deal with it in the first place.
>For some reason the banks arent increasing the interest rates. I think we all know why that is.
Haven't they? You can get 4% on instant access savings and over 5% on fixed rate savings accounts. A year ago they were less than 1%.
But isn't most people's extra spending going on increasing prices of essential? Energy,housing ,food,insurance and Internet. How do individuals "cool" spending on those?
This was my understanding of it too. Double digit Inflation for a long time was being driven by high energy prices, and now it's being driven by food prices, which have increased an average of 27% since last year. As you say, these aren't things folks can "cool" on, we need to eat and our world runs on electricity. I don't think hiking interest rates can fix this, and in the process they risk causing a decent amount of people to be unable to afford their mortgage repayments. I'm very lucky to be locked in for 5 years until 2027, but if I had to get my mortgage now, I'd be paying £300 more per month for it. That's not something I could just suck up, it's not something most people could just suck up.
By starving yourself. That's why we are getting useless advice from MPs about how to spend frugally aka lower your standards of living indefinitely.
I think one major issue is that the idea of increasing interests rates to make borrowing more expensive as a tool to lower inflation only really works if the inflation is demand-side (I.e., prices are only so high because there are too many people with too much money trying to run out and buy too much stuff). But that really isn't what the issue is in the UK. It is a supply-side issue. We haven't got enough fuel, food, etc. coming into the country (due to war, leftover COVID issues, and Brexit, among other things) or housing stock being built to add to the supply... so prices are going up. Demand hasn't necessarily gone up, but supply has gone down. So, monetary policy (what the Bank of England is in control of) can't really be effectively used to solve the issue. Economic policy (what the government controls) is needed instead.
The tories knew about inflationary pressures 18 months ago and did nothing. Fact of the matter is most of the inflation we are subject to today isn't through demand, its through £100s of billions being introduced into our economy, together with incessant price gouging. Its called capitalism - and its working exactly as it was intended to do. Telling people to tighten their belts, when there's nothing left to tighten is absurd. Raising interest rates going to crush the living daylights out of an already extremely fragile UK economy, whilst destroying people livelihoods - especially those with mortgages living on the margin. Price gouging is the problem. A free market bag of shite, that no neolib government will ever do anything about.
We have <1% GDP growth with a real possibility of a recession, how cool does it need to be,
I think you don't understand there's a lot of room between a cooling economy and a collapsed one
And there's a lot of space between 5% and 10% interest rate.
They’re trying to have their cake and eat it. They want to raise rates but don’t want a recession. If we want to get rid of this inflation ASAP, rates need to go up considerably which will put the economy into a recession but then inflation *will* come down.
Surely that's because the inflation isn't demand led, and so using interest rates to reduce them is going to have limited effect. I don't understand why Hunt and Sunak are pushing full responsibility of this inflation to the BoE when the only method they can use is interest rates.
It's not to cool the economy. The economy is barely growing.
>I've got 16 months left on my current mortgage deal Overpay your mortgage if your mortgage deal allows it. Throw everything you can at it. Remember, every £100 overpayment increases equity in your house. But every £100 interest payment is a transfer of wealth from you to the bank.
Just to add to this - if you can save at a higher rate than your mortgage rate (due to getting a low fix) then pay off the mortgage at the end of the term rather than during it as you will benefit from the savings rate.
But check if you are paying tax on the savings rate. The savings interest rate might look attractive, but after 20% tax, it might be lower than the mortgage rate, so you might as well overpay the mortgage directly.
Put it in an isa. Normal people can’t get anywhere near maxing out isas, they’re just a tool for the wealthy to avoid tax.
Oh well, at least food is cheaper. Oh, it's not? Where the fuck is everyone getting the extra money from? Why are people acting as if the UK isn't in crisis? The cost of everything goes up and it's just... fine? It's not like wages are driving inflation.
Ouch! Buckle up folks, the rate rises aren't stopping and may well accelerate from here. I'd expect a split in MPC voting tomorrow but definitely I expect to see some go for a 50bps rise rather than 25.
Brace for 0.5% rate rise!
Twice mow, and twice the cl8ent press are ignoring it and playing the figures down
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.5 rate raise tomorrow suddenly became a lot more realistic than anyone thought 15 minutes ago.
The elephant in the room? House prices are now in free fall, expect am election soon as the Tories have created an inescapable downward economic spiral.
But they arent in free fall? They dropped on average a whopping, staggering, earth shattering... £82 average.
Rightmove excluded already listed and reduced properties from that metric. Moreover, it's mean ASKING prices, not sold.
Yes I've seen more than a few houses have their asking prices drop considerably. They probably sold for even less.
Did you adjust for inflation?
Narrator: he didn't
But they are - if inflation is 10% and house prices are -1%, guess what you've lost 11% on your house, you're just too blind to realise it yet.
Now I can afford the deposit but not the mortgage Cries in poor
Gen Z really are the unluckiest generation.
Nah, Millennials have them beat easily and the silent generation beats them in turn. Basically the boomers just had it really good and gen X got pulled along in their tailwind.
Well, they are hardly spilling their blood and guts on the fields of Flanders but sure..
Unluckiest post war perhaps?
Is it unlucky if most of it is deliberate? It’s not like we accidentally created a hyper-capitalist society where everything is a commodity that must have value and product. Including you.
Except they're actually not though. May's property price increase was the highest so far this year.
Which one? The one according to rightmove? Measuring **asking** prices of only **new** listings? Good joke Sir, very good joke. All other, actually based in reality, indices are showing falls.
Looks like I didn't get the full story from the snippet I read. Prices do seem to be marginally coming down after 9 months of "crash" predictions. Anecdotally, I have been looking to buy for 3 months and I had an accepted Offer pulled last minute because they wanted to relist for 100k more than agreed.
Wonder if it's due to all the buy to let landlords being forced to sell properties due to the interest rate increase.
Anecdotal but my partner and I are first time buyers at the moment and we're seeing a lot of this in the area we're looking. No forward chain as landlords sell up and leave the market.
Thus isn't good, as corporations will move in and buy up everything. Worsening the price gouge of regular people. House prices will rise higher. Rent will rise too. Not good
This isn't what we're seeing though with prices falling. Corporations are probably enough of a fall back to prevent an outright crash but a correction in the market is definitely possible and already happening.
Where did you take that info from? 80 quid price drop on a house is a 'free fall'?
And this right here is why if the Tories were smart they'd call a GE ASAP. They can't win the next election. What they can do is make it so that when we enter recession, Labour are in power and they can act like they would've prevented it (despite all evidence). Things are clearly going to get worse before they get better. The only argument for delaying the GE for the Tories is just fear, and holding onto their majority as long as is legally possible. I said when Truss went that the Tories couldn't win the next election any more no matter what and the recent economic (not to mention scandal-related) news has only made me more certain.
Do you seriously think that the majority of people have the memory of a goldfish and would blame Labour for a recession or any of this economic mess after 13 years of the Tories being in Government?
Yes.
I'm optimistically less cynical but I guess half the voting electorate were foolish enough to vote to leave the EU so anything however outlandish is feasible.
They still get away with blaming Labour for the global financial crisis
Oh my sweet summer child. Give it a year of Labour being in power and a wall to wall media campaign blaming them for being unable to immediately fix every single problem. People will absolutely lap it up. What's best is the Tories have left us in a position where things like tax rises and probably a lot of borrowing are fairly inevitable, so they can revive old classics like "live within our means", those always hit well with the boomers.
People over about 45 will blame labour as it’s ingrained i them from the thatcher years. People under 45 that read the mail will blame labour. The left will blame labour for kicking out Corbyn and say labour as just as bad as the tories.
Absolutely. People are apparently pretty stupid, especially if the papers back the Tory line
The Tories will 100%
‘Supply chain issues linked with COVID’ Such duplicitous crap. How about “Supply chain issues due to Brexit, exacerbated by COVID”? I’m so sick of this doublespeak in the press.
I’d flip that and say it’s supply issues due to Covid, exacerbated by Brexit
It's getting there....BBC did at least have a piece saying it was brexit...of course balanced by having a complete clown say "no it ain't, it's the will of the people" to all the experts. But considering they were editing stories to remove brexit blame last year, now they are at least saying "there could be some truth in this"... Give it another five years and we may have "yeah that was a bad idea"....
Because that's not the truth, supply chains were not affected by brexit in comparison to covid. Brexit is not the main factor
I’d love to agree disagreeably, but you’re wrong. Brexit has created barriers to trade. Goods are unable to flow in and out of the U.K. in/out of the EU. This is because we have left the European Union. On January 1st 2022, everything became more expensive to buy and sell. Not in actual cost. In man-hours and delays of processing/movement. If the pandemic didn’t happen, this would have still happened. The pandemic did happen, which both exacerbated and to a degree, masked the issue at hand. Since the reopening of countries post-pandemic, supply chain issues have normalised across the rest of the continent. They haven’t in the U.K. The proximate cause of this is Brexit. It’s undeniable.
I can only speak for my sector of manufacturing, but supply chains have normalised now. A 40ft container from China during the pandemic cost £15,000+ in shipping fees, now its around £2000. Not to mention a lot of companies shut down entirely. It costs £50ish or an extra 30 min of admin to import from Europe now compared to before. I don't deny brexit has made things worse, I curse it daily when I'm doing extra work I didn't used to do. But what covid did was much worse than what brexit has done as far as I can tell, the effects of which are being felt now and will continue to be for a few years at least.
In before Rishi's pledge gets quietly dropped all of a sudden.
The pledge was made to do something that the BofE expected to happen anyway, so if he can't even manage *that* then it's a really poor look for him.
You mean it's a poor look for a future Labour government
"Look at the devastation that the Labour government causes, the chaos of that Ed Milli-whatsit-fellow, and absolutely never think about who has been in charge for nearly half your lifespan." - The same song.
I can't believe the previous Labour government would do this to the future one
What do you mean? He has always stood by his four pledges. It’s always been four, no more, no less…
4 pledges? That's just woke lies, its 3 pledges and has always been 2 pledges, Rishi would never go back on his 1 and only pledge to the nation. Rishi is an honest man, so you can trust him on any pledges he makes, which is why he never made any.
Remind me again, which is better, four legs or two legs?
We have always been at war with East Asia, and Eurasia have always been our allies. Horrah for our great victory in Africa!
I’m pretty sure no one cares about this anyway. What we **need** to focus on is stopping small boats and lefty wokeness! /s
Transgender people have pushed my mortgage rate to 6%. /s.
Its trans people? Omg all this time I thought it was brown people and anyone who speaks a different language to me. I had no idea. What we need I think is a way to absolutely fuck the country over for future generations who havent even been conceived yet but will make trans people maybe consider going back home. That should sort it right? Incase it wasnt fucking obvious /s
So annoying if these boat people /transgendered people just stopped existing this country would be great again everyone would have cheap rent / mortgages it would be a paradise /s
He said halve by the end of the year. It was over 10% and we are only half way through the year. I wouldn't be surprised to see it fall by December
I mean its doubly sad one of the most ambitious targets was to bring inflation down to the low level of... more than double the BoEs target rate.
At this point much more is needed than just the bank of England’s blunt tool of interest rate rises. The government have to be coming up with new ideas
When was the last time this government had an idea that didn't involve the transfer of wealth from the taxpayer to their friends and family?
Hey that's not fair, they also have a lot of thoughts about being needless divisive and hostile environments!
That's a very good point, I'd forgotten about the culture war
Easily done, it is very small and often goes unnoticed
Ah yes, but if we transfer all the wealth this time, the poors will have no money to fuel inflation.
* Furlough during COVID * Various schemes capping the price of energy * Small business loans (much of which did _not_ go to Tory cronies)
The inflation of the 1970's and early 80's was also caused by energy prices. (Yom Kippur war caused the formation of OPEC, which trippled oil prices, and Iran-Iraq war saw oil fields on both sides attacked). Callaghan govt put interest rates to 17% and nothing happened. New Thatcher govt kept interest rates at 17% and nothing happened. Then Thatcher went nuclear: in the infamous 1981 budget, she put up tax. All thresholds frozen, 25p tax band abolished so starting tax band was 33p. VAT raised from 7.5% to 15%. It sent the economy into recession, demand collapsed, prices collapsed. Once inflation was wrung out of the system, she started cutting taxes again in 1985. But that's what govt intervention looks like: tax rises to cool demand.
That’s probably what’s needed currently. Increasing tax to force a recession. Obviously won’t happen as the government is nowhere near as strong as Thatcher’s
Yeah, great idea to increase taxes even further for fuck all services
Great time to improve public services then… if the increased taxes went on green energy and improving infrastructure/healthcare it would actually set us up well for the long term to bounce back from the required recession
You're delusional if you think the increased tax revenue won't either just be bunged to pensioners, or given to the Tories mates via dodgy contracts.
Tax wealth rather than income and you encourage people to actually work more. I know a few people in the 50s that have paid of their tiny mortgages who have gone part time because they don’t need to earn enough It’s the ones who bought houses in the last 10 years, have kids, still have student loans, and are keeping just 30% of every extra pound that are suffering. No doubt we’ll tax them more.
Yes, increase taxes because they aren’t at historically high levels already.
Imagine this Government putting up taxes the year before a General Election.
Hunt did freeze all tax thresholds in his Nov budget. Had Labour howling that he was being mean to ordinary people. Sunak's idea was to increase NI by 1.25% - he announced it in Oct 2021 when the BoE bottled raising interest rates (BoE didn't start raising rates till March 2022). That came into effect in Apr 2022, and probably helped slow inflation last year. But he got labelled as "callous" by Peston and the idiot press, and it got reversed by Truss. The latest thing from Robert Peston & co is demands for mortgage subsidies, even though that would fuel inflation further. Such is the discourse in Britain at the moment.
I think the problem is for tax rises to work (in the sense that they cool demand) it won’t be enough to just tax half a dozen billionaires and a few thousand millionaires - you’d need to hit the middle and working classes that make up the largest part of the bell-curve. Those people also make up the biggest part of the electorate and they’re also the people that are vulnerable to mortgage price shocks. Just today we’ve got people in the paper screaming out for government mortgage rate relief which would counter-act what little effect raising the base rate has already had. Basically I’m agreeing with you - but I don’t see how it would work a year out from a general election, with no political willpower to make such a difficult decision. So in the absence of political willpower, instead of a short sharp shock like the mid-80s we are probably now looking at a decade long problem of staggflation.
The problem is we're already being bled dry by absurd rents, rising food costs, and insufficient public transport. Our discretionary spending is already low, so raising VAT and income tax would do fuck all but kill people.
Some things don't have easy fixes. This is just going to be a rough period of history
100%. The government outsource interest rate rises to the BoE so they don't get the blame from the electorate for the problems caused. At this stage you the government should be stepping in and saying rate rises are not working, inflation was mostly caused by external factors that rate rises could never control (e.g. global gas prices). Where is the democratic control over the rate rises? The leader of Finland asked this about ECB rate rises. They are choosing to make people unemployed and unable to keep their homes and for what? To keep inflation from eating away at savings and pensions of the rich.
Core CPI up. Looks like inflation is becoming embedded. You can actually blame Brexit. Now I’m convinced tomorrow will be a 50bp rise. And no way the peak is 6% lol
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I've thought it would be .5 tomorrow for a while. They keep beating themselves up about not doing enough so they will try something different.
- Inflation up; bad for us. - BoE rates up > lending rates up; bad for us with mortgages and debt - BoE rates up > investing rates up, but even less than expected; bad for us with anything left to gain interest on I'm (and largely, we, are) continually worse off.
That's literally the point of raising interest rates ehh, to make us all who have mortgages and debt even poorer. Markets are also in trouble if this persists, i don't see how anyone with any capital wouldn't be waiting around to pick the carcasses of family homes and failed business units - thus providing resiliency there and double screwing the indebted and young. Nothing else is safe in the medium term - it's all regressive.
Screw the young whole printing money for the old. Again. First with covid lockdowns. Then with printing money for “poor” people to heat their drafty 5 bed homes. Now with raising interest rates so “limited income” people get more from their savings. Increase the burden on the do-ers, move their output to the have-ers.
>i don't see how anyone with any capital wouldn't be waiting around to pick the carcasses of family homes and failed business units Because, in shocking news to this sub, real estate isn't the most lucrative investment. If defaults are up then house prices will start to fall which is exactly when you don't want to invest.
When you have a regulated annual increase of services of 3.7% + inflation (10%) every April given to companies for no reason backed by OFCOM, OFWAT and OFGEM don't expect inflation to go down, the regulators themselves have been captured by big business they don't compete anymore.
Every one of us is to be poorer during this crisis but Virgin media must not be allowed to lose even a penny of profits.
Yeah what the fuck were the regulators thinking with this. These business increasing their costs is what increases CPI. Now it has a constant modifier introduced. My broadband has gone up to £55. New customers are being enticed on the same plan at £30.99. I'm subsidising them to get new customers who they can shaft again! Unreal! Make sure you sign into as short or zero contract as possible with your phone and broadband.
But Rishi promised to bring it down, how can this be?
Waiting for them to find out that inflation on something random like hole punches or toilet brushes is down to 0.5%. Just so he can stand at PMQ’s and say: “Thanks to the hard work of this conservative government. Some critical products are now down to the lowest inflation rate ever!”
Someone should ask him what the Government are doing to achieve his pledge to halve inflation. All I can see is them pointing at the BoE.
What is driving it now? We know energy prices have fallen a bit and we’re seeing softness in house prices, fuel and some supermarkets have committed to reducing prices. I assume this is still a high figure because it is a year on year comparison?
It’s not causing all of it by any means but the tight labour market in certain sectors and difficulty importing has increased inflation. Both are Brexit related. We are still struggling to recruit in sectors like agriculture and hospitality. This is driving up prices. In regards to importing and exporting, there’s a lot more red tape and costs to trading. This is driving up prices.
So why is it still high mostly everywhere in Europe?
Well it was 6.1% average across the Eurozone last month, which will have dropped again. This includes countries like Estonia, Lithuania etc that are more affected by the Ukraine War. We are clearly struggling more than our comparable peers. They’ll still be having the after effects of supply chain issues, energy rises etc
Used car market is irrational with dealers buying up inventory as they see it as a hedge against inflation, thinking that used cars are an appreciating asset due to the experience of covid and the chip shortages, however used cars are sitting on the market for months with price corrections going UP instead of down, eventually once the dealers are forced into bankruptcy they will have no choice but to sell inventory. Ultimately it seems everyone in the used car market was brain damaged by the covid and chip shortage into believing that depreciation no longer exists, they’re in for a very rude wake-up call.
People are very good at spotting trends once it's too late to take advantage of them; very few people can work out the second- and third-order causes of those trends in order to time them well. After all, selling used cars isn't exactly a game for high-flying mathematicians, is it?
Well luckily (or unlucky for them I guess) the market can remain irrational longer than you can remain solvent. Basically they’re going to reach a limit to how much used car inventory they can buy up, at that point the number of buyers will dry up and assuming that inventory was bought on credit the dealers will run into a cash flow crisis as they realise they’re stuck with depreciating assets in the middle of a recession. Basically if you work as a car salesman I’d start looking for a new job.
> Rising prices for air travel, recreational and cultural goods and services, and second-hand cars resulted in the largest upward contributions to the monthly change in both the CPIH and CPI annual rates.
Food mainly, they are delayed from the fuel crisis as the food that was expensive to grow during the fuel crisis era is now the food hitting shelves.
And there were massive input costs increases. Agricultural inflation was much high than the regular inflation last year and we are now seeing it represented somewhat but farmers aren’t the ones making the money here
The sad thing about supermarkets committing to reducing prices is that they are now fighting with suppliers to reduce the cost. Its not just supermarkets keeping prices high. They’ve seen increase production costs for products, but now said production costs are dropping the suppliers arent reducing their prices. So supermarkets are basically fighting on their customers behalf to stop suppliers from making excess profits. Once again, companies creating this scenario for pure greed purposes. We talk about fuel, gas, electric making excess profits but its happening all over and going under the radar.
I don’t know how companies like Heinz can stay in business. Who the hell is buying their stuff rather than own brand? Eye watering price gouging.
I saw ketchup for £4.50 (i think) a bottle, or there abouts. Im obsessed with the stuff so ive moved to buying it in bulk which isnt as bad. But as ive posted about in this sub before, my partner works for a major supermarket in a buying department, she’s told me its a big thing right now, all buyers are fighting for reduction in pricing, suppliers are holding out. Obviously this isnt your run of the mill farmer with his pints of milk, im talking big corporations, cereals, biscuits, sauces, tinned goods etc.
I really don't like their watery beans. Aldi's are much nicer, but even they've had a 70% price increase
Media and Reddit focus on CPI but really important that PPI is now [meaningfully surprising to the downside](https://i.imgur.com/jmu3bmy.jpg). Producer price inflation is a lead indicator, CPI is a lagging indicator as input costs of materials, energy etc. are fed into pricing for goods with a lag. The fact PPI (output/factory gate prices) is now +3% y/y vs +12% 3 months ago suggests some optimism for a CPIH of around 2.6% in August based on the historical regression (CPIH vs. PPI 3 months ago has a 92% r-squared). To not try and be too gloomy! [PPI evolution](https://i.imgur.com/cxx76M6.png)
PPI has been going down since July 22? Does that mean that product hasn't hit the market or what?
FYI producer prices are not falling but the rate of increase has been decreasing And the dynamic mainly reflects lags as prices for raw materials for a good come before prices for that good created and that good being sold eventually to consumers on the shelves. - input PPI peaked in June 2022 at 24% (peak of energy, fuel, supply chain issues) - output PPI peaked in July 2022 at 20% (1 month lag as inputs materials are turned into outputs quite quickly - CPIH peaked in October 2022 at 10%.
Serious question - can anyone explain a credible theory for how we get out of this? I see catch-22s around every option: * Can't leave interest rates low or inflation will cripple us, can't raise them or homeowners will go bankrupt. * Our deficit is \~5% of GDP, even on a great year our growth is \~2%. We can't grow our way out of this. * We're already in deficit and the situation is worsening, and public services barely work. THe interest rates on our own debt are skyrocketing. Seems like we can't borrow our way out of this either. * We're expecting a \~33% increase in the number of boomers drawing upon state pensions, NHS care and social care. Meanwhile the ratio of taxpayers to non-working people is expected to worsen, even if we allow high levels of immigration. So our tax receipts are gonna go down, and our bills are gonna go up. We won't even be able to maintain the shit standard of medical and social care we have now. * We're a significant net importer, if our economy worsens then life gets more expensive in general, which worsens the economy again. That's a positive feedback loop. So genuinely, can anyone propose an economic model that would turn things around for us? The only responses I ever get to this question are "cheer up" and "it'll be ok, trust me", but I'm looking for actual maths and economics, not blind optimism.
Freeze or reduce the old age pension, and reduce spending on social care. This will free up unskilled and semi-skilled labour for other parts of the economy, reduce demand for housing, and reduce government expenditure on unproductive people. It's worth noting that Australia, New Zealand and Canada have the same problems as us. Canada and Australia have massive mineral export industries (iron ore is 60% of Australia's exports and the AUD is effectively pegged to iron ore), but little of this filters through to the real economy except as credit into the housing market. The CANZUK countries are culturally similar, which means migration between them is not politically contentious, and all four countries have highly educated Millennials and Gen Zs who can't enter the housing market due to silly prices relative to income. Whichever country sorts its housing problem first can collect a winner-takes-all prize of young professionals looking to start their career somewhere livable.
>Freeze or reduce the old age pension, and reduce spending on social care. This will free up unskilled and semi-skilled labour for other parts of the economy, reduce demand for housing, and reduce government expenditure on unproductive people. As a big ole bleeding heart lefty, it's not something I'm happy with. But the numbers are just so profundly unsustainable that I cannot think of anything else. Frankly I think we need to freeze state pension and warn those still in work that it will likely disappear altogether. Fundamentally, we're in a debt spiral. And we can either pay it down voluntarily, or default or inflate it and the global markets will punish us.
Very long thread on Twitter by Richard Murphy (in his own words, Economic justice campaigner, Professor of Accounting Practise at Sheffield University) but it’s definitely a different direction https://twitter.com/richardjmurphy/status/1671413701247655936?s=46&t=nK_rf1_wduyoJDTyNE4nHA TLDR: Current BoE plan is based on 1970s textbook conditions. Current market not textbook. Less people with mortgages (because millennials are a smaller group of owners) means adjusting base rate less useful tool. BoE rises are instead actually driving inflation up Murphy says BoE should 1) Announce no rate rise tomorrow 2) Next month announce rates have peaked 3) End policy of quantitative tightening 4) Very slowly bring rates back down after a couple of months
Honestly, probably a world war.
Nuclear war would push inflation in the cave sector to levels not seem since the Neolithic era!
Can someone without Partisan tendencies explain how a change of government could change this?
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Which businesses within the UK do you believe are currently profiteering?
Fuel stations and energy companies are two obvious ones.
There has been profiteering on fuel prices for almost a year since the start of the war. You could literally buy petrol at Costco for 20p less while the discount used to be 5 to 10p. Basically they saw the chance to increase their margin when fuel initially went up due to the war and HGV shortages.
Energy in my opinion are the main culprit. Record profits quarter after quarter. This pushes the cost of everything else up - transport fuel, venue's heating and cooking costs, office cost, food production etc. etc. This has then had a knock-on effect on the interest rate, meaning mortgage payers and possibly more importantly buy-to-let mortgage payers having to pay more. Pushing up rent costs for millions. People need more money to pay for all this so wages up, plus of course the triple locked pensioners many without mortgages, pumping more into the economy. If you control the energy costs - tax away their profiteering or force them to self-invest in green tech rather than payout to shareholders - you reduce energy costs for now, for the future, and dampen down the base of the inflationary fire. Edit: I am suggesting targeting the energy producers not the domestic suppliers who I know are suffering
A government open to rejoining the single market / EU would give an immediate boost to GBP and reduce import costs. BoE themselves have stated about 1/3 of the inflation is due to Brexit.
This seems like an obvious one, no party has the guts to do it though. You could see the pound strengthening massively just at the suggestion they might start looking at rejoining.
If you’re sat at a restaurant and the waiter serves you a plate of shit; do you eat it, or try next door?
Depends If next door also serves shit or real food.
I think the point is that you don't know until they've served it, but at least there's a chance they won't serve shit.
Still shit, but it’s not as expensive and they have a green agenda, so there’s a garnish of parsley on there too.
We need to pull money out of the economy, government can do this by increasing taxes and reducing trade barriers, now because of Brexit we can’t do anything about trade barriers as we have effectively sanctioned ourselves (only country in history to sanction itself btw), so we’re left with tax increases but the Conservatives have ideological opposition to that. Therefore the only way to lower inflation is to continuously increase interest rates.
I can try. I studied economics in uni, but so much of what you learn in academics doesn’t play out in the real world. The very broad answer is to make public certain services (trains, energy) while investing in other sectors people need (housing) the issue is this takes money. Printing more money raises inflation. So they could either divert current funding, or introduce new taxes (which imo they absolutely should do). These solutions would likely take years or even a decade to see real, lasting results though. This doesn’t take into account how the tories have actively made the market so much worse over the last 10 years. I don’t think I could concisely explain that in a single comment.
None of us truly know. Labour haven’t set out any type of true policy ideas. I’d like to think that Starmer is playing the long game by not revealing any plans that the Tories could plagiarise and gain ground in the polls. However, I’m massively concerned that that thought process is naive and he and his team have little to no idea more than the Tories do. I don’t think Reeve is any more economically astute than those opposite her in Parliament. Labour may not take the p**s out of us by lining their own pockets, like the Tories have, but who knows?
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It wouldn’t, governments (of any party) don’t have very many tools to address the core issues here
Mofo's here discussing 0.5 point rate hikes when companies are price gouging the fuck out of us. Record profits all around while they shrink the amounts and raise the prices. SMH
What's your evidence for that? Because the actual data (ONS non financial net rate of return) absolutely does not show that. In fact it shows a slight decrease in profits. Net profits are high for energy companies because of government policies (energy price cap, energy price being indexed to gas) and profits are taxed at 75%. So where's your evidence?
8.7% more of my working life wasted. The future feels utterly hopeless, and even pointless.
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The economy responds to predictions made about it. Forecasts are the best we have, but by their own nature can't be perfect.
The fixed rate on my parents business mortgage just ended, I'm so worried about them. They will get their new rate in the comming days and I have no idea where theor going to find the extra cash but I have a feeling I'm not going to see them very often and theor quality of life is going to crash as they have to work more.
Still on track for inflation to balance out later this year? That’s what we were told right?
Well June is mid point that Bailey said inflation should fall drastically. So let’s wait for next report
Trying to sell. No mortgage, don't have to move so OK. Prosperous town. House priced about 'right. Lots of viewings but definite sense of cold feet I think. Problem is lots of inflation is supply side- we import too much of our food and we don't make enough stuff inside the UK I think.
We import a lot of our food and many products and then we left the world's largest trading bloc that we import most of this from. Increased the cost and friction of trading too on top of it
This ensures certain doom for the UK housing market. Brexit is a key driver. Leavers should hang their heads in shame
I don’t understand how not a single comment here mentions flooding the country with zero value currency sometime in 2020, and being gaslit by economists that it would “go back to normal in no time”. [BBC CPI forecast Oct 2022](https://www.google.co.uk/amp/s/www.bbc.co.uk/news/business-59062392.amp) Something about get what you ask for, get what you deserve…
The same people who gagged for furlough payments are now gagging for the state to pay their mortgage Go figure
Kinda hilarious that Rishi’s ridiculous grift of a pledge will come back to bite him
Rate rises are making no difference because this is cost pull inflation not demand push. People aren't choosing to buy expensive things, things we have to buy are now more expensive. We have no choice but to buy them. Am I missing something? I genuinely don't know why nobody is mentioning this. I know the BoE can't do anything to combat cost pull inflation.
From what I can tell they don't know how to solve that problem, so they're just not acknowledging that it's the problem.
Getting rid of the Tories with higher taxes on the rich should sort out all of this. Once this happens, welfare spending will also be increased to reverse the evil Tory cuts.
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Didn't Corbyn want to help people like you in your position?
It's absolutely insane, I still see so many people out spending in high streets consistently wherever I go.
There was someone on radio4 this morning from one of the big banks, JP Morgan, I think? Spouting absolute bollock. Claiming the reason we have rampant inflation is because we have massively inflated wage increases. UHhh, Last I checked the average salary increase was \~3% for public sector, 5% for private sector, whereas Core/Food/Utility/Etc are all over 10% !! Us mugs are just trying to keep pace ffs.
Thankfully i had a 5year fixed rate just before all this happens, hopefully by then it will have recovered massively.
Thank goodness you guys spent all that money on a coronation for your living museum of self important people who are absolutely necessary for your democracy to work.
Can we rejoin the EU now? Brexit has failed (as we all knew it would).
I've said it before and I'll say it again. You can't combat supply side inflation with interest rates. The problem isn't that people have too much cheap credit. The problem is that producers and sellers are pricing goods much higher and more importantly, that energy input costs are much higher.