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?

@twominutesmore

I'm aware of how it works. I have a mortgage, I still think interest shouldn't have stayed so low since 08 and inflated the housing market.

little by little is the way to go right now.

I agree

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...
That's a great idea!

If only we could form a free trade bloc with our nearest neighbours, wouldn't that be fabulous?

It could improve labour mobility too

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

@LakieLady
@JustKeepSwimmingJust
@TheCatsKilledTheGonks
Seriously ? Will you all just get real for a moment

Free trade, freedom of movement & employment across countries, ‘harmonised’ regulations?????

You do realise that would require co-operation and collaboration, complementary legislation …..

I suppose that next you’ll suggest the option of a common currency and contributions into a central fund to support particular essential industries such as farming and fisheries to ensure that they maintain a capability in bad times as well as good times, sharing surpluses among those with shortages, investing in local, national and multinational projects and negotiating wider international trade deals with countries outside of the collective

Impossible and could never have happened in the whole history of time

@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...

But but but ... i distinctly remember the likes of Grease-Smug et al telling us that food and fuel bills would be cheaper after Brexit.

Surely they can't have been, gasp, lying...

Alexandra2001
International comparisons are meaningless

Not really - the recent protests in Spain and Belgium are an indication of general unhappiness in those countries:

english.elpais.com/economy-and-business/2021-11-22/in-spain-wave-of-protests-over-price-hikes-puts-a-damper-on-recovery.html

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

When CPI replaced RPI, many said it was the governments attempt at rigging the figures

Do you have a link?

[quote jeepersdeepers]@twominutesmore

I'm aware of how it works. I have a mortgage, I still think interest shouldn't have stayed so low since 08 and inflated the housing market. [/quote]
Sure. It's just that you referred to the government keeping interest rates suppressed but it is the BoE.

From the FTs annual survey

"majority of respondents also said that the UK’s recovery would lag behind that of comparable economies, with many of them blaming this underperformance on political instability and a lack of any credible long-term economic strategy."

"Although many countries are experiencing high inflation, supply-chain disruptions and labour shortages, Brexit would make these problems more severe in the UK, economists said"

For those of us with mortgages, and for the wider markets, any move to increase interest rates are alarming

If any move to interest rate is alarming then you have clearly borrowed too much without thinking about the future.

Generally people have been too greedy with all the borrowing and the BofE are shit scared to raise the rates. I think they need to get on with it personally.

The other factor to consider though, is that inflation, (either RPI or CPI), is expressed as an increase compared to the figure 12 months prior. As such, current figures are a 7.1% (RPI) or 5.1% (CPI) increase, when compared to December 2020, when we were in lockdown. I'm not suggesting at all that prices aren't rising, of course they are, but compared to a very low baseline figure.

"Generally people have been too greedy with all the borrowing and the BofE are shit scared to raise the rates. I think they need to get on with it personally."

Their announcements suggest they anticipate inflation falling to 2% by the second half of 2022 without the need for significant interest rate hikes, as upward pressures on inflation following the pandemic naturally ease I guess.

I grew up with inflation, in was over 20% during the 1970s. My mortgage was 15% at one time. People borrowed lower relative to income because interest rates only ever went up it seemed.

The last few years have been astonishingly stable as far as inflation and interest rates go.

"Generally people have been too greedy with all the borrowing and the BofE are shit scared to raise the rates. I think they need to get on with it personally."

And many businesses have borrowed to stay afloat during the pandemic.

From the FTs annual survey

From the Times - 28 December;

Britain to recover the fastest of G7 countries

The economy is set to make the most rapid recovery from the pandemic among G7 countries, returning it to where it was before Covid by the spring, economists believe.

www.thetimes.co.uk/article/britain-to-recover-the-fastest-of-g7-countries-q0bm78bpm

Britain’s economy is on track to outpace every other country in the G7 in 2022 for the second year in a row, according to analysts, with the country set to surge back into life after facing a more severe recession than other wealthy nations during the pandemic.

The country’s rapid booster vaccination programme to help curb the spread of the Omicron variant of coronavirus is a major reason for Britain's upbeat outlook, with economists at Goldman Sachs expecting growth of 4.8 per cent next year, exceeding the 3.5 per cent expected for the US, 4 per cent for Germany and 4.4 per cent for Italy and France.

The International Monetary Fund is even more optimistic, expecting Britain’s economy to grow 5 per cent in 2022, higher than the 4.9 per cent expected for the global economy overall.

HSBC is also upbeat on UK output, expecting the country's gross domestic product to rise 4.7 per cent over the next 12 months, while its forecasts for the rest of the G7 range from 4.3 per cent in Italy to 2.2 per cent in Japan.

www.thenationalnews.com/business/economy/2021/12/28/britains-economy-set-to-outpace-every-nation-in-the-g7-in-2022/

@twominutesmore I believe the two institutions are very much intertwined eg quantitative easing.

@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...

What a cracking idea 😂🤣

I think this has real legs.

Their announcements suggest they anticipate inflation falling to 2% by the second half of 2022 without the need for significant interest rate hikes, as upward pressures on inflation following the pandemic naturally ease I guess.

I think inflation will be more persistent personally.

There's only so much our government can do about imported inflation.

I'm sympathetic to savers. Many retired people rely on interest for their income. No easy choices.

there are benefits available to pensioners on low incomes. I know a few pensioners "relying" on interest but they all in reality have significant housing equity and large large pots of capital, its not their sole financial asset

Unfortunately I think we are in for a tough few years with living standards declining for a while. The low productivity growth hasn't been addressed & no government has got to grips with the challenges of an ageing population.

@Siuan

I grew up with inflation, in was over 20% during the 1970s. My mortgage was 15% at one time. People borrowed lower relative to income because interest rates only ever went up it seemed.

The last few years have been astonishingly stable as far as inflation and interest rates go.

People didn't needto borrow such high multiples of income because housing was far cheaper in comparison to incomes. 🙄

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

Only partly true.

CPI first started to be used as the main inflation measure and hence the target for the bank of England under Labour in 2003. The coalition government in 2011 switched most benefits and public service pensions to CPI, but not state pensions which were protected by the triple lock.

RPI continues to be used for rail fares and social housing rents.

@lljkk

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.

Absolutely spot on. In periods of high inflation it is better to be a debtor than a saver.

Back in October 2020 in the "How to pay for Covid" thread I posted:

I fear that the governments of whatever persuasion over the next few decades will use the tried and tested but terrible old method of reducing debt ie. High Inflation.

[quote jeepersdeepers]@twominutesmore I believe the two institutions are very much intertwined eg quantitative easing. [/quote]
Well they are certainly intertwined since they are owned by the government. But their remit to adjust interest rates is independent and free from government interference to achieve the inflation target. So I just didn't think it was accurate to say that the government should raise interest rates.

@jeepersdeepers

Their announcements suggest they anticipate inflation falling to 2% by the second half of 2022 without the need for significant interest rate hikes, as upward pressures on inflation following the pandemic naturally ease I guess.

I think inflation will be more persistent personally.

I hope you are wrong and they are right but I guess we shall see soon enough.

@DeepaBeesKit

There's only so much our government can do about imported inflation.

I'm sympathetic to savers. Many retired people rely on interest for their income. No easy choices.

there are benefits available to pensioners on low incomes. I know a few pensioners "relying" on interest but they all in reality have significant housing equity and large large pots of capital, its not their sole financial asset

That's interesting. I know several retired people who have downsized homes to add equity to retirement investments. The sums seem large but return a modest income.

@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...

Exactly. There is very little that can be done about supply side inflation, which this is. Monetary policy, ie interest rates (which are now in the control of the Bank of England and not the Govt) is only really an effective tool against demand led inflation - which this isn't.