4% rise in inflation… what does this mean in real terms?

[MrsKDB]

I’ve been reading that the BoE expect to increase rates by 4%. I know that means our savings will accrue more interest but equally our mortgage payments will rise. We don’t have any other debt. What else happens when rates go up? How does it change our daily lives?

I think you may be conflating interest rates with inflation? The headline I read is that the Bank of England expects inflation could go above 4% but are not expecting to raise interest rates this year.

Your savings and mortgage payments are linked to interest rates not inflation, so are not predicted to change in the immediate future.

Inflation is the increase in the price of goods. You're likely to notice the difference at the supermarket checkout and the petrol pump.

The Bank of England use interest rates to control inflation.

If they put up interest rates, the cost of borrowing goes up which will get passed on to you as a consumer in many ways - prices for goods, mortgage, credit etc.

Freddos will be more expensive

Following.

And to add, if I am allowed, an additional question, inflation...
What happens when it goes up, and unread usually both inflation and rates are inverse correlation so one up one down, but both going up atm?

@yippyyippy

Freddos will be more expensive

I remember when they were 10p

As above, you're confusing inflation and interest rates. Interest rates are expected to rise in December, possibly to 0.25%, and possibly in March again possibly to 0.5%. The BoE use interest rates as a mechanism to dampen down inflation.

The inflation rate itself largely tells us what we already know. Prices are rising.

@TumtumTree

I think you may be conflating interest rates with inflation? The headline I read is that the Bank of England expects inflation could go above 4% but are not expecting to raise interest rates this year.

Your savings and mortgage payments are linked to interest rates not inflation, so are not predicted to change in the immediate future.

Inflation is the increase in the price of goods. You're likely to notice the difference at the supermarket checkout and the petrol pump.

And if interest rates do go up, yes borrowing rates go up, but does that necessarily mean interest rates for savers go up too??

inews.co.uk/inews-lifestyle/money/inflation-rise-what-happens-uk-rates-increase-meaning-how-prices-affected-explained-1199999

Is this any use, op?

"Olivier Konzeoue from financial and investment specialists Saxo Markets told i:”For the average consumer or household, inflation means loan rates adjusted higher, a decrease in the length of interest-free periods on credit cards for balance transfers and for purchases whilst access criteria to mortgages could be tightened in the course of the next year.”

Thanks so much all. I will check that link now @FourTeaFallOut

@lightand typically yes, these are all benchmarked to the Bank of England base rate.