Interest Rates Rise As Inflation Soars At Fastest Pace
For 10 Years
The Bank of England has raised base interest rates for the
first time in more than three years, in response to surging prices and an
official inflation rate of 5.1%.
The increase to 0.25% from 0.1% followed data this week that
saw consumer prices, used to measure the UK inflation rate, climbing by the
fastest rate for 10 years.
Eight of the nine Monetary Policy Committee members voted to
increase interest rates despite the Omicron variant slowing down an already
weakened economy by causing people to spend less during the Christmas season.
The Bank's action will increase mortgage costs of homeowners
and businesses with commercial loans and overdrafts not on fixed rate deals.
If you have not yet fixed your rate you might want to start
thinking about doing so. Talk to your financial adviser.
UK inflation is now running at 5.1%, the highest in a decade
and double target rates. The bank governor Andrew Bailey expects inflation to
rise to 6% further early next year.
The real rise in the cost increase of living is much higher
than the official rate, as many of us are experiencing. The sharp rise in
wholesale gas prices is driving inflation, and that is continuing to push up
domestic energy bills.
Energy and fuel prices affect the cost of all goods and
services, as costs have increased for businesses and suppliers. Wholesale prices
of raw materials and commodities have also gone through the roof this year.
Inflation is rising around the world fuelled by ‘money
printing’ by central banks on a scale never seen in modern history. The
official US inflation is now 6.8%, the highest for over a decade, but half the
rate suggested by Shadow Stats which claims real costs are rising by 15%.
The newly raised rates will increase the cost of buying a
home, although they are still near the historic low and unlikely to affect property
prices and housing demand unless rates rise further.
The FT reports that Fed officials expect three interest
rate rises next year to combat rising inflation. The markets went up following the announcement!
If you think you will not be adversely affected by interest
rates going up, think again. Governments owe trillions of dollars, pounds and
Euros to bondholders and will have to pay higher interest rates to service the
debt they created. Who do you think is going to pay the interest? That’s right,
taxpayers.
Savers will welcome the news as they will earn slightly more
on their savings deposits in banks currently earning next to zero.
Don’t get into debt this Christmas
A friendly warning to avoid spending money you don’t have
and getting into debt this Christmas, especially with higher credit card rates
on the way.
On solution could be to hold a family ‘truce’ on presents or
values, or opt out of the spending spree altogether if you can. You can still
have a good Christmas without getting into debt and paying for it for it next
year.
Financial education in investing is the key to building and
keeping wealth. Never stop learning!
Keep watching or listening to my free podcasts on iTunes and
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channel for regular financial news and updates.
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