Should we have a national ‘no spend August’ to help lower inflation?

[ALady78]

Like many people I’m really concerned about high interest rates. We’re actually still in a fixed rate mortgage deal until early 2025 so I was hoping things would calm down by then. But now they’re saying interest rates will have to go higher than previously thought and I’m already panicking about what we’re going to do.

So if the idea behind higher interest rates is to curb spending then why haven’t they clearly said this? I’ve got this from the Bank of England website today:

‘Higher interest rates will make sure inflation comes down by affecting spending habits in the UK.

This happens most directly if you have a mortgage or you are paying back a loan.

Either way, you may have to spend more on these things. And that means you will have less to spend on other things that are captured in theConsumer Price Index (CPI) measure of inflation. This is the measure of inflation that the Government asks us to target.

Food, housing, transport, and household bills are everyday essentials. You can’t choose not to spend on those. But you may put off buying other things.

Also, higher interest rates may mean you are less likely to want to take out a new loan to buy things unless you need to.’

If this is the case shouldn’t we all stop spending immediately on things which aren’t essential? No new household items, takeaway’s, days out, clothes etc. I’ve carried on as normal at the moment because we can, but I would stop if it would help. I mean, I know they always say ‘interest rates have been increased to curb spending’ but then why doesn’t Rishi hold a press conference and CLEARLY request us to stop buying ‘stuff’ if that’s what they need us to do?

Is the solution for us all just to stay in and buy only basic food for the rest of the summer?
But then won’t people who make or provide ‘non essentials’ lose their jobs if we stop so how does that help?

Many evonomists think the bank of England have got it wrong.

It's a complicated issue with no easy solutions and brexit hadn't helped

So does higher inflation/high interest rates (they're the same thing I take it?) mean that it will cost first time buyers more to take out a mortgage? I'm looking to buy in 2024/25, is it a bad time to buy?

In August? When all the kids are off school and the weather is nice? Doubt it.

No thanks. Why should I spend less on things I want to reduce interest rates on other peoples’ mortgages and loans?

I admit I'm confused how there's supposedly a cost of living crisis, but at the same time they keep raising interest rates because people wont stop spending!? Is there a COL crisis or not, or just a big divide in wealth? Genuinely confused!

Surely this is a joke.

I don’t think ‘the people’ would be happy about that though. You go out to a soul crushing job and work your fingers to the bone 45 hours a week and then you’re told by some rich man on telly that no, you can’t go out for pizza in August, you greedy little povvo. Stay in and stop spoiling the economy by buying yourself a pair of new socks out of your pitiful little wage packet.

Is this just the latest way of blaming ordinary people from macroeconomic problems?

The current inflation/interest rates issue isn’t because people are buying too many pairs or shorts in primark.

https://www.reuters.com/world/uk/why-does-uk-have-such-painful-inflation-problem-2023-05-26/#:~:text=Britain%20has%20struggled%20more%20than,which%20adds%20to%20inflation%20pressure.

This explains why the UK is particularly exposed.

I gather the situation is much better in the Netherlands.

I have nothing to cut back on

So no one spends any money in the shop I work in for the whole of August. It’s non essential retail so perfectly conceivable if everyone got on board. The company can’t afford to keep running, we all lose our jobs. Or at the very least I was last in, I’ll be first out.

Marvellous.

You are very selfish.

I don't have a mortgage but I have a decent amount of savings.

It would be great to have the value increase- via intrest rates, not decrease- via high inflation!

I feel like August bar December is probably the worst month to suggest for this.

Well at least then you’ll be on board for no spend September and won’t be buying takeaways or clothes.

This is so stupid. You have falling inflation and strong consumer spending in the US, you also have a central bank that has increased rates by 50bps numerous times. The BOE is is too scared of crashing the housing market and so won’t raise rates more aggressively. Not the fault of the public.

Don’t eat out to help out.

August is the height of the school holidays!!! How ridiculous!!

Seriously though: the better thing to do is to negotiate/punish the companies taking the piss.

eg we had a storage lock up. They put the price up twice in 18 months by a total of 70%. So we emptied it and ended it. £115/month saved/not spent.

I’ve been scrupulously working to reduce our energy consumption: down about 15% for the first half of this year compared to last. So again, money not spent.

Target the companies profiteering first.

OP, they're not hoping you stop spending. They're hoping you magically create a situation where you can afford to spend. This is pretty stupid, which is why there is so much Tory rhetoric pretending that 'the poor' (ie., anyone not coasting along happily in the current financial situation) have only themselves to blame. They would like you to believe that the crisis is caused by feckless poor people who'd have pots of money to invest sensibly, if only they weren't so feckless. It isn't the case.

TL/DR: they don't want you to stop spending; they want you to work an 80-hour week so you can afford to keep spending.

There had to be higher interest rates sometime though. They were at an all time low. Not everyone wants low interest rates anyway, throes without mortgage or low mortgages/long fixes would want the higher rates for savings and investments.

Inflation is a complex macroeconomic concept - particularly in a global economy. There are multiple factors at play in determining inflation, domestic expenditure i.e. too much money chasing too few goods is only one of them.

Inflation is ‘managed’ through interest rates but there is a lag of about 18 months for that to take effect. Other economic shocks may happen in the meantime that reduce inflation, stopping buying your takeaway isn’t one of them.

Is the solution for us all just to stay in and buy only basic food for the rest of the summer?

ooo lovely, a non-COVID lockdown.

Oh do you remember that?! We all went bonkers over flour

ok if nobody bought anything from primark they would go bust.

their staff get sacked, their suppliers, their advertising people .. everyone in the supply chain. And everyone they buy from.

if we stop spending surely that will mean
small businesses going under - increasing job losses more pressure on the welfare state?