Inflation jumpsto 3.7% - what now?
18 January 2011, 11:27 AM
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Inflation jumpsto 3.7% - what now?
Well there is a surprise. Inflation has rocketed in December due to the higher costs of food and fuel.
Now the government are in a very tricky situation. Logic says that when inflation jumps you raise interest rates yet doing that after a VAT increase and with an already faltering economic reocovery could be a very risky business.
They are also still rulling out any help on the petrol price issue albeit they are at least now acknowledging the iisue.
Difficult times ahead for the coalition methinks!
Now the government are in a very tricky situation. Logic says that when inflation jumps you raise interest rates yet doing that after a VAT increase and with an already faltering economic reocovery could be a very risky business.
They are also still rulling out any help on the petrol price issue albeit they are at least now acknowledging the iisue.
Difficult times ahead for the coalition methinks!
18 January 2011, 12:02 PM
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BoE seem to have forgotten that they are there to keep inflation down to level dictated by Govt and not to be influenced by political whims. So really they should put interest rates up to keep inflation down even if that upsets Messrs Cameron and Osborne and their **** in the Liberals.
dl
dl
18 January 2011, 12:04 PM
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They need to raise the interest rates, it's only going to rise again next month when the VAT rise is taken into account.
I have a fuel receipt from July 2009 where a litre of petrol was 98.9ppl, 18mths later, we are at 127.9ppl.
Real inflation is a lot higher than 3.7%. A mars bar costs 72p nowadays, the country is going bonkers
I have a fuel receipt from July 2009 where a litre of petrol was 98.9ppl, 18mths later, we are at 127.9ppl.
Real inflation is a lot higher than 3.7%. A mars bar costs 72p nowadays, the country is going bonkers
18 January 2011, 12:11 PM
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BoE seem to have forgotten that they are there to keep inflation down to level dictated by Govt and not to be influenced by political whims. So really they should put interest rates up to keep inflation down even if that upsets Messrs Cameron and Osborne and their **** in the Liberals.
dl
dl
18 January 2011, 12:27 PM
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You can only use interest rates to control marco economics when you have a strong economy, not one that is just about hanging on by it's finger nails.
Think about it. Prices are increasing and you want to increase interest rates that will only increase prices further? No thanks.
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18 January 2011, 12:32 PM
#8
Interest rates are too low and have been for too long, it is favouring those with huge debt, massive interest only mortgages and not those with any savings, sat in the bank your money is devaluing each month whilst people are paying £200 a month mortgages and spending the rest, to me that is **** about face.
Not saying to stick them back up massively but people need a reminder that this is an artificial situation and they should be stacking the cash saved on their low rate borrowing to pay back in to get the capital down or for when the rates do eventually go up.
Not saying to stick them back up massively but people need a reminder that this is an artificial situation and they should be stacking the cash saved on their low rate borrowing to pay back in to get the capital down or for when the rates do eventually go up.
18 January 2011, 12:41 PM
#9
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I'd be tempted to say 0.5 increase probably wouldn't be too bad an idea. Theres still been alot of debt created and alot of mortgages still sold over the last 2 years that IF rates went only as far as they were before all this started (say 5.5%) the damage it would do would be even worse than anything that happened in 2008.
People will still have got loans they can't afford and been allowed mortgages they can't afford when rates rise. Mortgages should really only be given on a 30/70 ratio - you have to stump up the 30%. This will of course bring down house prices but it really is the only way.
One point that many overlook is how small businesses are coping right now - the outlook for small businesses is probably the worst ever. Raising rates on top of VAT increases will probably bury alot of small businesses.
People will still have got loans they can't afford and been allowed mortgages they can't afford when rates rise. Mortgages should really only be given on a 30/70 ratio - you have to stump up the 30%. This will of course bring down house prices but it really is the only way.
One point that many overlook is how small businesses are coping right now - the outlook for small businesses is probably the worst ever. Raising rates on top of VAT increases will probably bury alot of small businesses.
18 January 2011, 12:43 PM
#10
Its a catch 22 Jacko 
For the past ten years savers have been hammered by poor interest rates on savings only to serve the ones who live beyond their means. I mean the current 0.5% base rate is a joke.
But of course, the BOE HAS to do that because all the stupid banks in their infinite greed gave mortages and loans out to people who could not afford to pay them. If they raise it, more people will default on payments and banks will be left with even more shortfall.
Remeber the days when the base rate was 7.5%? Seems like a lifetime ago.
For the past ten years savers have been hammered by poor interest rates on savings only to serve the ones who live beyond their means. I mean the current 0.5% base rate is a joke.
But of course, the BOE HAS to do that because all the stupid banks in their infinite greed gave mortages and loans out to people who could not afford to pay them. If they raise it, more people will default on payments and banks will be left with even more shortfall.
Remeber the days when the base rate was 7.5%? Seems like a lifetime ago.
Last edited by ALi-B; 18 January 2011 at 12:45 PM.
18 January 2011, 12:52 PM
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Interest rates are too low and have been for too long, it is favouring those with huge debt, massive interest only mortgages and not those with any savings, sat in the bank your money is devaluing each month whilst people are paying £200 a month mortgages and spending the rest, to me that is **** about face.
Not saying to stick them back up massively but people need a reminder that this is an artificial situation and they should be stacking the cash saved on their low rate borrowing to pay back in to get the capital down or for when the rates do eventually go up.
Not saying to stick them back up massively but people need a reminder that this is an artificial situation and they should be stacking the cash saved on their low rate borrowing to pay back in to get the capital down or for when the rates do eventually go up.
I'd like to see small but steady interest rises, to maybe 3-4% within the next couple of years. I think that would be sustainable.
Those that borrowed far to much? Let them fall. They only have themselves to blame.
18 January 2011, 01:00 PM
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That is the biggest worry with this. There are a lot of businesses clinging on by their fingernails hoping things will turn a corner and the VAT rise, rising cost of fuel, rising cost of raw materials etc. are all meaning that corner is never coming.
18 January 2011, 01:06 PM
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I agree with stilover, 3-5% is a good, sustainable value.
18 January 2011, 01:09 PM
#15
Being prudent and frugal is not rewarded in our society, I see people I know who have gone bankrupt runnign round in nice cars, going on three holidays a year, I dont do bad but cant afford a holiday this year and am overdrawn, our savings which we are keeping to fund our kids through education are devaluing, its almost worth just running up some debt like every other f*cker !
I dont want to see people lose their homes but if they have one bigger than they need and lots of luxury items like cars they cant afford them they need to downsize, over the last 10 years lots of people have decided they arent ordinary punters, they deserve the finer things in life (see it on here sometimes) and have aquired, through debt expensive tastes and are now panicing as it is all getting more difficult to sustain, you know all those big flash cars bought out of house equity which is now being eroded, double whammy of house going down and the ineviatable five year old, now not so shiny X5 being precisely worth bugger all.
18 January 2011, 01:12 PM
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Why not do a credit card cash transfer in your account at 0% for 12 months and pop it into a high rate savings account. Then just pay back the dosh for the credit card after 12 months and keep the interest. Free money......if you are well disciplined!
18 January 2011, 01:17 PM
#17
Two points:
1. I said this would happen, since I noted more than one business carefully increasing prices by an average of 4.5% instead of the 2.5% that the VAT required. What did government do to stop this sort of profiteering?
2. 30p increase on a litre of fuel is just silly. I know SOME of it is tax and VAT increases, but has the cost of crude REALLY jumped so much in 18 months, given that 65% of fuel price is tax?
1. I said this would happen, since I noted more than one business carefully increasing prices by an average of 4.5% instead of the 2.5% that the VAT required. What did government do to stop this sort of profiteering?
2. 30p increase on a litre of fuel is just silly. I know SOME of it is tax and VAT increases, but has the cost of crude REALLY jumped so much in 18 months, given that 65% of fuel price is tax?
18 January 2011, 01:22 PM
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Two points:
1. I said this would happen, since I noted more than one business carefully increasing prices by an average of 4.5% instead of the 2.5% that the VAT required. What did government do to stop this sort of profiteering?
2. 30p increase on a litre of fuel is just silly. I know SOME of it is tax and VAT increases, but has the cost of crude REALLY jumped so much in 18 months, given that 65% of fuel price is tax?
1. I said this would happen, since I noted more than one business carefully increasing prices by an average of 4.5% instead of the 2.5% that the VAT required. What did government do to stop this sort of profiteering?
2. 30p increase on a litre of fuel is just silly. I know SOME of it is tax and VAT increases, but has the cost of crude REALLY jumped so much in 18 months, given that 65% of fuel price is tax?
http://www.bbc.co.uk/news/business/m...elve_month.stm
And if you go back 13 months, then we have had a 5% increase vat and about 3p increase in duty. Plus the £ was ever so slightly stronger against the $. So yes, unfortunately, it does add up.
Last edited by Gear Head; 18 January 2011 at 01:28 PM.
18 January 2011, 01:29 PM
#21
Crude has increased by around 20% judging by this:
http://www.bbc.co.uk/news/business/m...elve_month.stm
And you go back 13 months ago, then we have had a 5% increase vat, about 3p increase in duty, so yes, it does add up.
http://www.bbc.co.uk/news/business/m...elve_month.stm
And you go back 13 months ago, then we have had a 5% increase vat, about 3p increase in duty, so yes, it does add up.
So the ACTUAL cost of the fuel is 38p.
Increase that by 20%, you get to 45.6p, an increase of 7.6p.
Extra VAT and duty don't add 24p to that, surely?
18 January 2011, 01:31 PM
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We are being screwed and no one is doing a bloody thing about it.
Last edited by f1_fan; 18 January 2011 at 01:32 PM.
18 January 2011, 01:36 PM
#25
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The buck stops squarely at the Governments door .... they had a choice whether to squeeze now or let the recovery take hold (as Labour wanted to do) - they have chosen to squeeze.
This is a political choice as the bad news is out of the way in the first 12 months of the LibCon Pact, they are betting our futures on them getting re-elected!!
They are Economically inept ... Brown and Darling were experienced in the ways of the economic world and did, indeed, save us from total collapse.
Interest Rates should increase 0.5% - then another 0.5% in March .... the markets have increased rates in anticipation anyway ...... the BoE should send a message to rein in any thoughts of people to borrow to buy.
Trouble with higher interest rates is that the value of the pound increases making exports (which we are doing rather well at at the moment) would stall.
But, all in all I would start hiking them up ..... as a saver, I am getting next to nothing in interest anymore
This is a political choice as the bad news is out of the way in the first 12 months of the LibCon Pact, they are betting our futures on them getting re-elected!!
They are Economically inept ... Brown and Darling were experienced in the ways of the economic world and did, indeed, save us from total collapse.
Interest Rates should increase 0.5% - then another 0.5% in March .... the markets have increased rates in anticipation anyway ...... the BoE should send a message to rein in any thoughts of people to borrow to buy.
Trouble with higher interest rates is that the value of the pound increases making exports (which we are doing rather well at at the moment) would stall.
But, all in all I would start hiking them up ..... as a saver, I am getting next to nothing in interest anymore
18 January 2011, 01:45 PM
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What, a near collapse of the UK and US financial markets requiring a taxpayer bail out, financial indexes nearly halved across the world, tens of thousands of homes repossessed, soaring unemployment, the near collapse of the Eurozone .... yeah ... just an adjustment 
Funny how when Brown was in power it was the worst recession since the 1930s depression and now it is just an 'adjustment'
Funny how when Brown was in power it was the worst recession since the 1930s depression and now it is just an 'adjustment'
18 January 2011, 01:55 PM
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I meant house prices.
I paid £122500 for my Flat in 2006. Valuers reckoned it was worth £130-£135K in June 2008. Had it valued again in June 2010 and guess what, £125k.
I part exchanged it in the end for a new build but they have just sold it for £120k.
Those figures, do not tell me that there has been a massive crash, regardless of what the news says.
The banks that went bust and needed bailing out were those with no capital and therefore, no room to move when the sticky stuff hit the fan, end of. Shame they had enough dosh to pay all those bonus's eh!
Yes there has been a massive financial crash, but from where I am sitting, nothing has really changed. I still have the same job and am being paid 4% more than in 2008, I still have a car and have bought a new house.
I paid £122500 for my Flat in 2006. Valuers reckoned it was worth £130-£135K in June 2008. Had it valued again in June 2010 and guess what, £125k.
I part exchanged it in the end for a new build but they have just sold it for £120k.
Those figures, do not tell me that there has been a massive crash, regardless of what the news says.
The banks that went bust and needed bailing out were those with no capital and therefore, no room to move when the sticky stuff hit the fan, end of. Shame they had enough dosh to pay all those bonus's eh!
Yes there has been a massive financial crash, but from where I am sitting, nothing has really changed. I still have the same job and am being paid 4% more than in 2008, I still have a car and have bought a new house.
Last edited by Gear Head; 18 January 2011 at 02:34 PM.
18 January 2011, 01:56 PM
#30
They need to raise the interest rates, it's only going to rise again next month when the VAT rise is taken into account.
I have a fuel receipt from July 2009 where a litre of petrol was 98.9ppl, 18mths later, we are at 127.9ppl.
Real inflation is a lot higher than 3.7%. A mars bar costs 72p nowadays, the country is going bonkers
I have a fuel receipt from July 2009 where a litre of petrol was 98.9ppl, 18mths later, we are at 127.9ppl.
Real inflation is a lot higher than 3.7%. A mars bar costs 72p nowadays, the country is going bonkers
Why can't the government see that the outrageous tax on fuel is having serious knock on affects pretty much everywhere else.