Does anyone else think the BOE is completely taking the P

[Brighteyedtriangle]

They kept rates so bloody unessecarily low for so bloody long. People on good wages but not by any means rich were getting half a mil houses, extensions and renovations left, right and centre. They have blindsighted a whole country into a false sense of security and then just pulled a rug.

Ok, ok I dont know much about economics if at all but they do so surely they know having interest rates at less than half a percent for so long is a recipe for disaster even stupid me saw this as silly and not sustainable.

And what were banks thinking and still are. I was looking at loans the other day and my high street bank said I would borrow upto 60k for a car. Wtf I dont even earn anywhere near that.

I can't see how the traditional interest rate v inflation will work in the current climate. There are so many people unable to make more cuts and then others at the other end who can weather the storm even with the rises. Surely it needs a spread of impact to influence the discretionary spending of most people?

It feels as though the rates will go up but so will everything else.

I guess my point is, a government that would Brexit the way this government did was never going to err on the side of caution! We all know they do not give a shit how many people lose their jobs or homes. They're gamblers by nature.

Couldnt agree more with that quote
Gamblers by nature

I cant see how people can be bailed out of this mess. There is nothing left.

I am sick of the men in the grey suits making all the decisions, fking them up and the little people paying for them. You know those educated men in grey suits.

I think the government are far more to blame than the BoE for how hard things are going to be.

I'm worried for the next few years.

Interest rates being higher encourages foreign investment which increases the value of sterling on the currency exchanges. This in turn reduces the cost of foreign imports which, as the UK is a net importer will help slow down the rise in consumer prices.

This is what I'm wondering too.

Interest rate rises are an incredibly blunt tool. Of course, the BOE don't have that many available to them. They haven't worked so far, for the reasons you list, and apparently the bank have been surprised by that.

I dunno what the fuck I'd do next if I were them, but I don't have the same faith as some posters do that this policy will curb spending enough to get inflation under control.

I've said on a previous thread that I'm currently spending money like water on getting jobs done to our house, garden and vehicles, and having some nice holidays - in anticipation of our mortgage coming off of its fix in 2025 and our disposable income going down.
So perhaps there are many others like me, where rising interest rates are, for now, actually fuelling an increase in spending!

Surprising that no one is blaming Liz Truss for crashing the economy whilst in power for all of 5 minutes and then swanning off with her PM pension and all the benefits a former PM is allowed to have. Can not see her trying to decide between putting fuel in the car or eating!

Totally agree with this. Although if I started a thread about all the fk ups they have made my head might fall off

Came on to say what @CalistoNoSolo said.
I think the golden rule of MN is is to in general ignore the first few posts of any thread as they are usually passive aggressive BS.

There certainly are.

Some people's response to the possibility of future income loss is to enjoy opportunities while they're available. I think the pandemic experience may have heightened this tendency. And also, some people have actually got more money now, because they're getting better interest on their savings. In most cases these people probably don't have a mortgage or much of one either, so interest rates are less capable of influencing their behaviour.

I was just going to post the same thing YorkshireIndie. A 65 billion pound bail out is shocking!

Apparently she and KK got “carried away”

https://amp.theguardian.com/politics/2022/dec/10/liz-truss-and-kwasi-kwarteng-got-carried-away-writing-mini-budget

Why is it that LT still receives a PM’s pension and appears at state events such as the coronation despite crashing the economy?

OP, money is all just a made-up theory, there is no such thing as "wrong" interest rates.

The BOE idea, that rates "should" be X or Y in order to keep inflation at 2%, is nothing more than speculation. It may as well be 75%, or 98%, a loaf of bread could cost £1.60, or it could cost £1200, it doesn't matter, it's all just a theory.

The fiver in your purse (assuming you ever carry either),is just a piece of paper, the only thing which gives it any "value" is YOUR belief that it is "worth" five pounds.

The BOE didn't keep "rates too low". They just changed the parameters of the system in response to the dataset no longer being applicable. All money is an illusion, all debt is an illusion. There is no "right" or "wrong" about it.

If rates had been 5% all along, we would still be in the same position. Only this time people would be talking about 12% rates.

It's just made up numbers.

Then why start this one to attack an organisation which doesn't set the rules? BoE have to operate within constraints set by the government of the day, they have very limited independence from the government as a consequence. They have only one lever to pull in complying with those constraints.

Point your ire at those actually responsible.

That makes sense thank you.

I do feel for those with large debts but trying to save or provide for your future if you weren’t in a position to buy property has been impossible really with such low interest rates. Savings were shrinking in real terms and with this huge rise in inflation in terms of purchasing power they’ve been decimated.

They would need to stay high for a long time after inflation returns to lower rates (which doesn’t shrink prices obviously, just slows the rate they’re going up at) for people to try and close the gap between what they’ve saved and what that has amounted to over the last decade.

Whereas interest rates going up was entirely predictable them going so low and staying there so long was not. People who thought for example that they’d invested and saved enough to live off interest for some years before having to start spending their capital have had a real shock. My retired parents for example. Plus people trying to save for deposits or future retirement.
Does that make sense? No economist.

I think with Truss it's because she's been and gone. She just doesn't matter. Whereas obviously the BOE do. Certainly she made an existing situation much worse, but she's also got about as much chance of having any further influence as I do of having angels fly out of my arse.

Rates were low for a long time after the recession to stimulate growth. Do you think we would be in a better position if they hadn’t been encouraging growth up to now?

The interest rate increase I understand it needs to happen, well as much as my uneducated brain can comprehend. Its the fact they were so low for so long its encouraged many people to massively over budget and the banks have let them. My affordability when I moved was way higher than I knew I could truly afford and that was at the low rates never mind how the rates are now. Many others were lured into trusting the banks know best.

Those were the things that started the inflation. Inflation is now becoming embedded because so many employers have increased wages (understandably) to help their employees to absorb the price increases. This creates a feedback loop.

The BoE interest rate rises are a blunt instrument, but the only tool they have to try and curb spending.

I saw no benefit to the rates being as low as they were. Only increased house prices as people could afford to borrow more.
Im sure there are plenty of other factors but the housing market is a pretty big one and effects both house owners and renters

You didn’t see it but it was there. Low interest rates incentivise spending and investment and disincentivise saving, thereby increasing growth. The housing market is not the only part of the economy affected by interest rates.

Blaming Liz Truss for what's going on now is naive and demonstrates that most people on MN don't really understand what's going on.

In May, the long bond yield reached the same levels it reached in October, yet she's been out of office for months. I don't think a Guardian article can be relied upon as an unbiased source. LIZ Truss and KK may have been impetuous but many economists agree that the BoE played a significant role in market instability at that time.

Increasing debt is not real growth. Our measures for what constitutes a healthy economy are pretty messed up.

I’ll happily bow to your superior knowledge as that seems to be what you want, but actually those of us who posted about Liz Truss were saying that it was odd she hasn’t been mentioned at all, not that her and KK’s mini budget was the entire cause of what is happening now, but that it played a significant part in unleashing market chaos, which led lenders to withdraw around 1,700 mortgage products in the space of a week, before reintroducing them at rates 1-2 percentage points higher. So the fact that her actions were significant at the start of all of this cannot be denied.

As for unbiased press reports, so much of uk journalism, financial journalism included, is owned and influenced by organisations that tend to lean to the right, I for one am very glad that the Guardian is there to present a counter view.

Not at the start of this. Interest rates had already begun increasing well before Truss got the big job. Hers and Kwarteng's idiocy accelerated an issue that already existed. We'd be facing the impact of various systemic problems now even if Truss had never been in Parliament, it just wouldn't be quite as bad.