To expect the govt to control inflation

[Janeypj]

With inflation at 5% nearly double from previous years, how are people supposed to meet living expenses! Plus the cost of fuel! AIBU?

It's the wrong 'sort' of inflation to be managed by interest rates. It's been driven by oil prices (energy), as the global economy opens up again and OPEC are refusing to increase oil production to meet demand. The US are trying to get countries to release strategic oil supplies to put more into circulation, the UK has agreed to do so. Also, supply chain issues, with tankers stuck in the wrong part of the world. Increasing interest rates won't increase oil production, nor get the backlog of tankers in China to where they need to be to get goods circulating again.

Significantly increasing interest rates right now, will increase variable mortgage rate payments, on top of higher fuel bills, council tax rises, NI hikes and food prices for families already struggling. It will also increase business costs for firms who have taken out huge Covid related loans - who will then need to pass those costs onto the consumer. Not to mention increase the cost of servicing the huge levels of debt the government has taken out to support the economy during Covid. A huge increase in rates in one hit also shocks the market, driving up longer term interest rates e.g. the level you can get a 10y fixed rate mortgage when your current one expires. The BoE was actually the first central bank in the world to raise rates - little by little is the way to go right now.

"But as the Tories have made massive cuts in benefits, in real terms, over the last 11 years, I won't hold my breath."

Ditto public sector pay.

Any Conservative voter must feel pretty disappointed in them right now. The party of low taxation, trickle down wealth and so on has proven to be anything but.

@sst1234

This is what happens when you lock down the country for months on end, then make them self isolate because they have a cold. Someone has to pay and the magic money printing machine comes out. If you want inflation to be curbed, you have to understand that you cannot have these ridiculous Covid restrictions.

Well I also don't want my kid to die of something avoidable in the back of an ambulance because the hospitals are overwhelmed. It's a balance isn't it.

this is worrying. we have just bought our first home this year after years of saving. I've never taken much notice of this kind of thing before. We are on a fixed rate until 2026 do these things usually clear up in a few years?

"t's the wrong 'sort' of inflation to be managed by interest rates."

But they do look at 180,000 different products to establish cpi.

@Christmascardsontheshelf

this is worrying. we have just bought our first home this year after years of saving. I've never taken much notice of this kind of thing before. We are on a fixed rate until 2026 do these things usually clear up in a few years?

I don't think anyone can say what money will be doing in five years but at least you've got a period of fixed rate stability.

@twominutesmore

Sure is. But the balance can redressed by stopping the self isolation measures for asymptomatic people. Omicron is like a cold for most people and not even that for others. If self isolation is scrapped for asymptomatic people and cut for those with symptoms, the balance starts to be redressed.

@balalake1

If you voted for Brexit and then for this financially illiterate government, then you are part of the problem.

Mr Johnson refused in a round about way to cut VAT on fuel this afternoon.

Everyday I'm glad that I voted remain

At least my conscience is clear.

When the mortgage rate is in double digits, that is when we have serious problems

Black Wednesday anyone !

Inflation will reduce govt debt faster (enormous debt due to covid controls). So govt motives are to let inflation run & run.

Now is a good time to be a debtor with big inflation wave coming -- you'll be fine, XmasCards.

There are so many things at play, like a perfect storm.

Fuel at the pumps has also increased because we moved to greener E10. It uses more ethanol, which is more expensive.

Retailers have also increased their margin by 2p per litre since last April. No real reason for that except trying to recoup losses from the lockdown periods.

@Christmascardsontheshelf inflation is currently expected to be back to target within a couple of years, so hopefully things will stabalise.

@twominutesmore yes, they look at a basket of products, but all of those products will be impacted by oil prices (in their production and transportation) and the fact that goods can't move freely at the moment because shipping containers are all in the wrong place. The cost of a sending a 40ft shipping container from China to the US has risen from $2,500 in 2019 to around $15,000 today, hence the cost of most goods has soared. Once the backlog has cleared, these costs should fall, without the need to hike rates to the levels seen pre 09/11.

Should have added, it's not just the UK, it's globally. Inflation in the US is 6.8%, in the EU it's 5.2%. In Turkey, it currently stands at 36% !!

@twominutesmore

The Bank of England are trying to control it by increasing interest rates.

Given the causes of inflation in this case, that will have minimal impact. It is Government policy decisions that could mitigate the impact to some extent. But again, that is not easy given the causes and would be very expensive. Who is going to pay for it?

@sst1234 Yeah, sadly nobody seems to understand how interconnected and global all of this is. The supply issues are very strongly influenced by the Covid restrictions in China, the semiconductor shortage, the political manouevring on gas supply from Putin, our failure to have any fallback on gas, the pressure on the electrical grid, the overall cost of green energy transition. The list goes on and on. Interest rates can't fix any of that. And on top of that we have this board populated by people thinking the government will be dishing out free daily Covid tests indefinitely whilst they put their feet up for a week of symptom-free R&R.

@twominutesmore

"But as the Tories have made massive cuts in benefits, in real terms, over the last 11 years, I won't hold my breath."

Ditto public sector pay.

Any Conservative voter must feel pretty disappointed in them right now. The party of low taxation, trickle down wealth and so on has proven to be anything but.

But - but - but - they got Brexit done. And but Corbyn...

@babybrain77

Lol. What do you expect them to do - wave a magic wand?? It's not that easy... and it's the central bank, not the government, which is responsible for controlling inflation.

No. The central bank's criteria for making interest rate decisions is based on trying to keep inflation at ~2% (a mandate that is also set by the Government). Frankly it's a blunt tool and probably not appropriate anymore anyway.

But many inflationary impacts are not really affected by interest rates anyway. The Government is responsible for managing the economy and public money and having contingency plans in place for mitigating the impacts of uncontrollable external events on national finances through long-term planning and risk management. Not much evidence of that though is there, so in this situation there is very little the BoE could do about it.

If you voted for Brexit and then for this financially illiterate government, then you are part of the problem.

This with bells on.

@JustKeepSwimmingJust

When inflation is being driven by imported costs on non-discretionary goods, such as food and energy, there is little the government can do. They could work together with neighbouring countries to reduce trading friction and therefore bring costs down...

🤣🤣🤣🤣 indeed! Perhaps some novel idea like a free trade area and harmonised regulatory frameworks...

@sst1234

Message deleted by MNHQ. Here's a link to our Talk guidelines.

So now we are being censored for stating facts? Facts like governments printing money to pay for Covid restrictions and that leading to inflation.

balalake1
If you voted for Brexit and then for this financially illiterate government, then you are part of the problem.

What's the problem with Germany, Spain and Belgium? Financially illiterate governments?

Annual inflation in the eurozone reached 4.9% in November, the highest in the last 25 years.

In November, inflation in Germany jumped to 6%, 5.6% in Spain, and 7.1% in Belgium.

www.aa.com.tr/en/europe/thousands-of-belgian-workers-hit-streets-to-protest-wage-law-inflation/2440325

Joe Biden is a disappointment -
US inflation rate rose to 6.8% in 2021, its highest since 1982.

www.theguardian.com/business/2021/dec/10/us-inflation-rate-rise-2021-highest-increase-since-1982

@TheCatsKilledTheGonks and what about the wealth of other policy tools available to the BoE? Either we have an independent central bank and trust them to action their mandate as best they can, or we let the economy return to being a completely at the whim of the ruling party.

BoE is not taking action because they clearly believe current inflation is transitory. Government can (and should) address the short-term impact of that on the poorest in society. But realistically a period of reasonable inflation is one of the most politically palatable ways of dealing with the huge additional debt burden this crisis has left us with.

@edwinbear

Should have added, it's not just the UK, it's globally. Inflation in the US is 6.8%, in the EU it's 5.2%. In Turkey, it currently stands at 36% !!

The RPI at 7.1% seems to be a far more accurate measure of inflation here in the UK, so many things seem to have doubled/trebled recently, especially in 2021.

When CPI replaced RPI, many said it was the governments attempt at rigging the figures..... oh! no surprise.. done by the Tories.

@Clavinova International comparisons are meaningless, every country calculates inflation differently but i'm sure you would agree that Brexit makes eu/uk trade more expensive for all concerned or stops it altogether... which i guess brings down inflation!