Category Archives: Interest rate

Inflation means continued cost-of-living hell for you; not so much for the Tories

Jeremy Hunt: he’s all right, Jack, because he has public money propping up his worthless hide. You aren’t so lucky.

Inflation figures for March 2023 have been released – and they foretell continued agony for struggling UK citizens who are trying to make ends meet in the face of Tory tomfoolery.

The baseline figure has – stubbornly, we are told, as if inflation is a sentient creature – remained above 10 per cent, falling from 10.4 in February just three-tenths of a percentage point to 10.1 per cent in March.

The reason wasn’t energy prices this time, though. No… it’s food.

The average price of food and non-alcoholic drinks has risen by a whopping 19.1 per cent in the year to March 2023 – the sharpest 12-month increase since August 1977.

This is partly because the availability of fruit, vegetables and sugar was hit by poor harvests in Europe and North Africa.

And importing those goods has become more expensive because the pound’s performance on the currency markets has been weak.

Furthermore, higher energy bills have meant increased transport costs and global supply chain disruption between March 2022 and January this year.

These energy bills, caused by the war in Ukraine, have forced producers to hike their prices.

Much of the above can be attributed to Brexit, which has added hundreds of pounds to the average UK household shopping bill due to increased transport and customs costs.

And the domestic apple-growing industry has suffered due to a lack of workers from the Continent, high energy costs, and low cash returns from supermarkets that buy the produce.

And prices are unlikely to fall:

Martin Deboo, consumer goods analyst at Jefferies, warned that the high prices are unlikely to fall, following the sharpest 12-month increase since August 1977.

He said: “Absolute pricing rarely falls very much.

“We expect consumers to be paying permanently more for products in 2023 onwards than they did in 2021.

This is particularly bad news for those of us on lower incomes, who are already struggling to make ends meet.

The Bank of England may decide that another interest rate increase is necessary, in which case many people with mortgages may be in danger of losing their homes.

In the midst of this, Chancellor of the Exchequer Jeremy Hunt has stepped in to claim – improbably – that “we can get through this”:

This Writer wonders who the “we” might be who can “get through this”. Is it just high-waged Tories?

I think Hunt’s words are a sop for people who are about to lose much of what they have spent their lives building – due to the ignorance and stupidity of the Conservative government in which he is a senior figure.

He just wants to keep us all tranquillised and quiet so we don’t end up protesting French-style.

But if anybody has an excuse to set their country on fire, it’s us.

The super-selfish Tories, with their Brexit and their privatisations, have deliberately harmed our quality of life. Saying “we can get through this” is no consolation at all.

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Interest rates rise again – are the banks deliberately prolonging recession?

The Bank of England has put interest rates up again – claiming that this is an attempt to fight inflation.

But inflation caused domestically – within the UK – is much lower than the 10.7 per cent rate that has been announced during the week, and falling (from 6.5 per cent to 6.3 per cent).

The higher rate is caused by price increases that cannot be changed by interest rate rises within the UK; we simply have to wait for these prices to drop. They are the result of political decisions to put the UK at the mercy of foreign businesses and influences.

Let’s have an example of mainstream media reporting on this:

And now the view from one of our favourite political economists:

Yes, that’s right. The inflation we’re suffering will be unaffected by UK interest rate rises.

All this decision will do is create further hardship for homeowners and small businesses, and prolong the recession that stupid Tory political decisions have caused.

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Half of renters fear they won’t be able to pay rent next year due to increases in the cost-of-living crisis

According to another article, “Just 250 people control wealth of £710.723bn, but 16.65 million people live in poverty”.

That could be the reason for the following:

Half of tenants are worried that they won’t be able to afford their rent next year, as 58 per cent have seen it rise this year amid the cost of living crisis.

Research from specialist lender Market Financial Solutions found that 49 per cent of renters were worried they would not be able to pay their rent in 2023.

At the same time, 48 per cent of landlords said they had increased rents on their properties due to rising interest rates and higher mortgage repayments.

In fairness, 56 per cent of landlords said they would allow their tenants some degree of flexibility when it came to making payments. Shame on the other 44 per cent!

The reason for the increases is higher interest rates from the Bank of England, meaning mortgage repayments have increased as well.

Economists have, of course, criticised the Bank for hiking the rates, because the ostensible reason – cutting inflation – is nonsense.

So why do it?

Why push up the level of anxiety in the UK when it is already critically high?

Is it some sort of co-ordinated effort to bankrupt the people of the nation and overload our already-under-resourced mental health services?

Source: Half of tenants are worried they won’t be able to pay rent next year, as 58% have seen rents increase amid the cost-of-living crisis

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If this is why the Bank of England is making the UK recession worse, it stinks

The Bank of England: it is not your friend.

One of the strangenesses of running a political website as a commercial endeavour is that one is reliant on the articles to pull in advertising revenue, and this means more popular items take priority.

More meaningful items then take a back seat until such time as they can be funded by the other material – but fortunately, today, lots of people are enjoying the Suella De Vil song, so I have an opportunity to look at why the Bank of England is hiking interest rates and worsening the UK recession.

I’m taking the information from Professor Simon Wren-Lewis’s Mainly Macro article (link below), which suggests the most likely reason I’ve seen so far – and it isn’t to stop energy price inflation, nor is it to stop food price inflation.

No – it’s to stop wage inflation. The aim is to impoverish you by increasing the difference between what things cost and what you can afford.

Here’s Prof Wren-Lewis:

A UK recession will do almost nothing to bring energy and food prices down. Instead what has worried the Bank for some time is that the UK labour market appears pretty tight, with low unemployment and high vacancies, and that this tight labour market is leading to wage settlements that are inconsistent with the Bank’s inflation target.

You can see the reasoning behind this, just with the forthcoming strike by the Royal College of Nursing, that is calling for a 17 per cent pay increase. The Bank’s inflation target is just two per cent, and has been for many years.

The article continues:

Earnings growth is around 7.5% in the wholesale, retail, hotels and restaurants sector, about around 6% in finance and business services and the private sector as a whole.

Domestic firms are under no obligation to compensate their employees for high energy and food prices, over which they have little control and which are not raising their profits. As a result, if firms were free to choose and there was abundant availability of labour, they would offer pay increases no higher than the increases we saw during 2019.

Average private sector earnings running at around 6% are not a problem for the Bank because it is anti-labour, but because it believes wage growth at that level is inconsistent with its inflation target of 2%… Earnings growth will slow as the UK recession bites.

What this means in layperson’s terms is that, by increasing interest rates, the Bank intends to make it harder for many firms to survive in the hope that they will lay off staff, forcing more people back onto the labour market.

Then, firms would be able to offer whatever wages they wanted (above the minimum, of course) on a take-it-or-leave-it basis, and if you couldn’t make ends meet, then that would be your problem.

It is a premeditated, deliberate attempt to worsen poverty for millions upon millions of UK residents.

I wonder whether this is another unintended consequence of Brexit? When the UK was obligated to accept workers from the European Union, employers benefited from exactly the kind of loose labour market that allowed them to offer subsistence, or lower-than-subsistence, wages.

Now those workers have gone and employers are forced to take on native workers, the pendulum has swung the other way. It’s a thought, isn’t it?

Prof Wren-Lewis goes on to explain that developments in economic thinking mean that the tight labour market should not require an interest rate hike to “correct” it (his word).

nowadays macroeconomists believe it is possible to end a boom [in this case an over tight labour market] and bring inflation down without creating a downturn or recession, because once the boom is brought to an end a credible inflation target will ensure wage inflation and profit margins adapt to be consistent with that target.

The lags in the economic system mean a central bank should stop raising rates while inflation is still increasing. If a central bank believes it will lose credibility by doing this, and feels it has to continue raising rates until inflation starts falling, this will lead to substantial monetary policy overkill and an unnecessary recession.

If that is why central banks in the UK and the Euro area keep raising interest rates as the economy enters a recession, then the truth is central banks are throwing away a key advantage of a credible inflation target. Credibility is not something you constantly have to affirm by being seen to do something, but something you can use to produce better outcomes. Furthermore central banks are more likely to lose rather than gain credibility by causing an unnecessary recession.

Of course raising interest rates to 3% is not enough on its own to cause a prolonged recession. Probably more important is the cut to real incomes generated by higher energy and food prices, which is enough on its own to generate a recession. On top of that we have a restrictive fiscal policy involving tax increases and failing public services. Both together should be more than enough to correct a tight labour market. To have higher interest rates adding to these already large deflationary pressures seems at best very risky, and at worst extremely foolish.

This will affect you all.

Sadly, as I indicated at the top of the article, only a few of you are likely even to have read any of the information here – certainly not to the end. So very few of you are likely to make any preparations for it.

For the rest, the next few years are going to be very difficult indeed.

Source: mainly macro: Why is the Bank of England making the expected UK recession worse?

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Interest rate rise will affect YOU. Read this to understand how

The bank of England has just imposed the biggest interest rate rise in a generation – increasing the base rate to three per cent.

There’s no reason for it. The inflation we’re facing isn’t caused by any reasons that an interest rate rise can combat – and energy prices are falling back to normal levels. The hike in interest rates will not affect the cost-of-living crisis in any way.

Instead, it will prolong the recession that the Bank of England has already said will be the worst in many years – if not the worst ever:

And this will affect you – as Martin Lewis explained on Good Morning Britain:

Buckle up, buttercup! It’s going to be a long, hard winter – because the bankers (who, by the way, have had their ability to give themselves unlimited bonuses restored by the Tories) want you to suffer.

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You have less money to spend because of inflation and interest rate rises. Why are markets shocked?

The Bank of England: why is it raising interest rates to fight inflation that won’t exist by the time the changes begin to take effect?

Interesting thread from Richard Murphy, explaining why you have less disposable cash – and questioning why the markets are so shocked about it:

Comments?

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Jeremy Hunt’s financial statement – and Martin Lewis’s reaction [VIDEO]


New Chancellor Jeremy Hunt has made a statement reversing almost all the economic measures announced by the previous Chancellor, Kwasi Kwarteng.

Money Saving Expert Martin Lewis reacts to his words:

What do you think? How will this affect you – or have you not considered this?

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Are you ready to lose your home to Tory economic stupidity?

The rise in interest rates means people with mortgages are having to pay more to keep their homes than at any time since the late 1980s.

Many of them won’t be able to sustain the payments at a time when the cost of living is rising across the board. That means people are going to lose their homes.

Here’s a video to explain it:

The issue was also discussed on the BBC’s Any Questions – with politicians predictably disagreeing wildly about the solution (I’ve had to split the audio file into three for upload purposes:

So we can have cheap, new housing – but it will be built on our valuable Green Belt land.

Or we can have cheap, new housing – but in unregulated zones created by the Tory government, and therefore probably won’t be worth having.

Whatever housing is offered to us, it probably won’t have the social infrastructure surrounding it that people actually need in order to live there.

Let’s be honest: This Writer can’t see any of the above as being a solution.

This Tory-created nightmare is just creating problem after problem.

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The Pound has plummeted; now interest rates will skyrocket. Here’s how it harms YOU

The grinning Kwarteng: do you think he intended to cause the chaos he has inflicted on the United Kingdom, and was actually laughing to himself about it during the Queen’s funeral?

Up close and very personal.

If you’ve got a mortgage, the amount you pay towards it depends on interest rates.

If they are going through the roof, then you may suddenly find that you don’t have enough to pay for your home – and, shortly afterwards, that you don’t have a home to live in.

Remember, the lower Pound means food will cost a lot more than it does already; we import 40 per cent of our food from the EU.

Now watch this:

The keyword from this is: unsustainable.

The answer, if the grinning Kwasi Kwarteng is still determined to avoid a windfall tax on energy firms’ profits, is higher taxes or cuts to public services – and he has cut the 45 per cent tax bracket.

So you can expect the axe to fall on public services – probably before the end of the year. That will mark the end of the UK’s society as you know it. Bye, Britain, it was nice knowing you (back in the 1970s before the Thatcher rot set in)!

Unaffordable food, housing (and energy, let’s not forget); a savage attack on public services to come. Is this what you wanted?

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Interest rate rise will hit your wallet hard and cause a deep economic recession

The Bank of England: its interest rate rise will hit you hard in the wallet.

The Bank of England has increased interest rates by a huge (for these times) 0.5 per cent in an apparently inexplicable move that won’t do anything to stop the current enormous increases in the cost of living.

What can possibly have possessed the Monetary Policy Committee at Threadneedle Street to do this monstrous thing?

The bank’s own forecasters are predicting that inflation will remain above 10 per cent until at least October 2023, putting huge pressures on ordinary people.

The bank is already predicting that the UK will fall into recession this year, and the interest rate rise will prolong it – so that, in three years’ time (after the next general election, take note), unemployment is expected to stand at six per cent of the workforce – and rising.

Energy prices – the main cause of the cost-of-living crisis – are expected to fall back during this period, although the predictions don’t take this into account. The hike in interest rates will not reduce the cost-of-living crisis in any way.

And the ultimate result, as Professor Simon Wren-Lewis points out in his latest Mainly Macro article, will be to reduce inflation to a point far lower than the Bank of England’s two-per-cent mandate permits. Who benefits from that?

Professor Wren-Lewis adds that it is possible the bank expects a new Tory prime minister – whoever that may be – to introduce support for people on low incomes in a bid to stop the excessive inflation and recession.

But there is no indication from either Liz Truss or Rishi Sunak that they will do that; tax cuts promised by Truss will go to rich people and/or corporations.

And, as Professor Wren-Lewis points out,

Excessive monetary tightening based on a guess of fiscal loosening is a dangerous game to play.

Sadly for most of us, the danger applies only to the poor, working people who actually keep the economy moving.

Source: mainly macro: Why does the Bank of England appear to be ignoring its mandate?

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Health Warning: Government! is now available
in either print or eBook format here:

HWG PrintHWG eBook

The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:

SWAHTprint SWAHTeBook