To spend or not to spend - how to help bring down inflation

[frugalita]

So inflation is still so high and driving up gov borrowing costs and mortgage rates
BoE is blamed for not doing enough
Gov is talking about price caps in shops

What can we do as consumere to help bring down inflation? If we are fortunate to be able to afford food and bills, should we spend some of our disposable income or stash them all in our savings?

I'm not talking about lavish spending but normal discretionary spending such as eating out, going out for movies and theatres, short break holidays, to house improvement and replacing household items that need replacing but can wait a year or two.

It seems that if we don't spend the economy would suffer, if we do then inflation would keep rising.

consumers not consumere

I don't understand the government and Bank of England's position on this because the cause of the current high inflation rate is not too much spending - not a supply & demand issue anyway.

Meanwhile small businesses and independent professionals in many sectors are struggling when their customers and clients can no longer afford to buy their products and services as everyone is now spending more on basic cost of living (mostly huge companies like British Gas and Tesco) instead of meals out, new clothes or paying for therapy sessions or haircuts.

Well that's how interest rate rises work. They dampen demand and force the country into recession, thus stopping inflation.

I wouldn't worry too much about trying to organise some sort of en masse activity. It won't be enough and it won't be co-ordinated well enough. The government will flatten demand through rate rises, and my guess is that it will happen in the next six months as rate rises pull more and more money out of the economy.

Every £200 more you have to pay on your mortgage is £200 less you can pay on inflationary goods and services.

The reason we are where we are now is because the BOE did not raise rates early enough and aggressively enough at the beginning of the tightening cycle. This will mean rates have to go higher, and will stay higher for longer than they otherwise would have done.

The reason they did this (IMO) is because they were too scared of crashing the housing market, which now is almost certain to crash due to the rate increase profile required to get inflation under control.

So yet another reason why high house prices have screwed the entire country.

I agree that we can use disposable income to reduce mortgage instead of buying inflationary goods and services. But if we are still fortunate to have lower mortgage rates than savings rate then it would make sense to save rather than paying down mortgage.

If we keep increasing our savings is that damaging the economy by not stimulating growth?

I'm not sure this is the right section of Mn to discuss monetary policies. I had a look across the site and there are Politics, History club, and News, but nothing for the Economy? Surely Mn should have a separate topic for Economy.

I think you mean it isn’t demand inflation.

Inflation is a measure of prices over the course of a 12 month period.The current inflation was driven reduced bu supply due to the restrictions on the factors of production. (Land,Labour and Capital). The last few years there has been issues with fuel, wheat & sunflower oil, agricultural workers and HGV drivers. Just to name a few.

The BofE use interest rates to try suppress demand by increasing the cost of borrowing and making saving more attractive. They are trying to get use to spend less.

But is 'spending less' actually going to happen when most of the inflation is on essential items like food and utilities that many people can't really reduce the amount they buy.

They buy the same things more or less, but spend a lot more than they did before and have less money leftover for other things or to save.

Many people will have seen their disposable income after essentials completely wiped out. They could have gone from being fairly financially comfortable to really struggling, because their mortgage, utilities and food costs have increased by hundreds of pounds a month, plus smaller increases on things like council tax, water, train fares etc with only minimal pay rises that go nowhere to cover the price increases they face.

Interest rates (Monetary policy) isn’t the most targeted or quickest. The poorest in society tend to suffer the most. They are spending more for less.

Less disposal income = less demand overall for goods and services. Think things like eating out, holiday and home improvements

so if you are fortunate enough to still have disposable income and need to spend on discretionary purchases (eating out, entertainment, replacing household items, non urgent house repairs etc) would you spend now or wait?

@frugalita That depends on your individual choice
Are you asking if the prices are going to go down in the future? If so,I don’t see McDonald’s selling 50p cheeseburger anytime soon.