Can someone explain interest and inflation and all that to me?

[MumblesParty]

OK so as I understand it, inflation is prices going up, and that’s a bad thing when it gets out of hand, as it apparently is in danger of doing.

So the Bank of England want to slow inflation down.

Inflation occurs when people are buying lots of things, so because products are in demand, the prices go up- is that right?

So the BofE want to stop people spending money. And to do that, they raise interest rates, so we’re all penniless after paying our mortgages, and not spending on products. As a result, the products get cheaper, and inflation is slowed.

Is that correct?

If so, then I’m confused, because we’re always being told that to boost the economy we need to spend lots of money, buy things, keep shops going etc.

So am I completely misunderstanding?

thanks

This is a very dry buy useful video!

I'm following this with interest too as I'm so confused.

I thought everyone has been skint for ages cost of living crisis etc (I certainly have!) so who is doing all the spending to push inflation up?????

You're nearly correct, but not quite. Products might not get cheaper when inflation slows, they just stop getting more expensive, or they still get more expensive, but not as fast.

However, the big difference this time is that a lot of inflation is caused by the rising cost of essentials, that people can't always buy less of, ie food, utilities and petrol.

So rising interest rates doesn't reduce demand for all inflation causing items as much as it should, so inflation stays high and people either really start to suffer because they can't even feed themselves, can't pay their bills or at best, can cover these things but nothing else so they can't eat out etc. And/or they get into debt, which has got more expensive due to rising interest rates.

But we're not allowed a pay rise so we can pay our bills because that would fuel inflation and the Government and people at the Bank of England who are paid six figure salaries to decide these things tell the little people that they just have to get used to being poor.

Then they express surprise that their futile rising of interest rates hasn't caused inflation to drop (no shit Sherlock), decide they've not been raised enough and raise them some more. Because they have no other choice and have to do the same as they do in the US. Or something.

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Yep, pretty much sums up the current shit show.

They will also claim that higher interest rates make imports cheaper, therefore lowering the rate of inflation. However, that is utter bollocks because the sole reason for UK inflation is the cost of imported energy and also energy prices in general. No amount of UK rate rises will affect the UAE who have stated two weeks ago that they will deliberately cut oil production to drive up the cost of their oil. They want to build a 500 mile long "line city" and need extra revenue to pay for it. So our interest rates are of no concern to them, they don't give a fuck, and we can't say

"sorry tesco, I can't afford to fill my car, do you mind if I offer to pay 90p a liter for my petrol instead of your £1.45"

Tesco will tell you to piss off.

Inflation can't come down because the most basic commodities we use in order to run a functioning society, ARE the very things causing the inflation.

But hey, as long as Richie Rich can pay 54k a year to heat his swimming pool, and the bankers on half a million a year are telling us pesky poor folk what's good for us, things will just carry on.

The UK is a fucking joke right now, we need an election ASAP.

The boomers who have no mortgages or nursery fees to pay to pay and the rich.