Inflation might be lower. But some things are still shooting upward in price, entirely as a result of the reckless interest rate increases that were wholly unnecessary put in place by the Bank of England.
As the FT reports this morning:
The FT does have the decency to apportion blame for this. It is not landlords, per se, who are exploiting their tenants (although those without gearing undoubtedly will be). Many are passing on the extra costs that they have suffered as a result of the Bank of England's deliberate policy of penalising UK society for inflation that was not of its creation, and which interest rate raises can do nothing to eliminate.
The result is that the young, the poorest and the most financially vulnerable are bearing the burden of the Bank's folly, that they are set to continue fur as long as possible.
I have said before, and no doubt will say it again, that economic callousness rarely comes more obviously than this. And I have to use that word. Indifference will not do. The Bank is not indifferent. It knows what it is doing, who it is doing it too and the hardship it is causing and it is planning to continue with it knowing all that because this is the outcome that they desire. And that is unforgivable.
But so too are the politicians who are letting this happen.
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Inflation hurts the less well off more than rising interest rates where the biggest burden there falls on homeowners with a mortgage. Inflation is the killer, deflation is welcomed by the poor.
Sorry – but deflation in wages is never welcomed
Thank you, Richard.
Is Alan Minter Herol Graham? Some pugilists frequenting Richard’s blog.
🙂
deflation in consumer prices is.. and the vast majority of the population have not have wages rise with inflation. That’s why there is a cost of living crisis particularly felt by the less well off.
I know there is a crisis
But wage rises will solve it
Deflation creates recession and unemployment. How do you think that will help?
Not true. Inflation most affects those with money and anyone on a fixed income. In this case higher interest rates are more than compensating the rich, so the residual effects land on those whose incomes have been suppressed, e.g. public sector employees. As a reminder, the 1922 inflation in Germany was pretty transitory in effect (there was a boom by 1925), but the 1930 deflation and slump brought Hitler to power.
Everything is so crude – especially the dumb ‘one lever-one-target’ interest rate -inflation target of the BoE. Its very framing seems designed to promote callous lack of any reflection on who will be affected in the real world.
Even if the BoE continued to be the government’schosen instrument – it could in principle be given targets for unemployment, minimum incomes / living standards , inequality between rich andpoor etc.
In such a fantasy world, if they did increase interest rate – they would also increase tax on the wealthy who would benefit most, increase minimum wage and maybe cap rent rises etc. This would build in mitigation – for the worst affected etc – and would promote comment on precisely who is affected and by how much.
Your ‘political economy’ discussion always includes the effects of economic measures on actual people – while the language of ‘economics’ on BBC etc is designed to make it purely ‘technical’- .
Can you point to the evidence that interest rates do nothing to solve issues with inflation?
This goes against all known economic principles developed over centuries, so I’m sure you must have strong evidence and a published, peer-reviewed paper discussing this?
In practice, inflation is reducing following the earlier rise in interest rates, just as standard economic policy said it would.
Where is this evidence that you claim exists?
Over many centuries the evidece on inflation is that inflation always dissipates quickly and until recently without any interest rate reaction. So, tell me, how is this evidence you say exists found when there is nothingt on which it can be based?
Explain this graph and why inflation always fell quickly without central bank interventions, please. https://fred.stlouisfed.org/series/CPIIUKA
Mrs Brown perhaps you would like to outline these: “all known economic principles developed over centuries” (I think you mean “well known”.
Taking the most recent bout of inflation – caused by (global) rises in gas prices – perhaps you would care to outline – using “economic principles developed over centuries” how local interest rate rises impact on rises in local inflation caused by global energy price rises. I think you will agree that a local interest rate rise will have exactly zero impact on global energy prices.
As Mr Murphy has argued, inflation will come down anyway (& has) – with or without interest rates rises.
I am very interested to hear what you have to say. Enlighten me and other readers of this august organ.
🙂
Rent cost inflation is directly attributable to interest rate rises. Alan Minter either cannot read, or is being deliberately ignorant/obtuse.
I was shouting at the radio yesterday listening to Radio 4 where they were referring to the rate of inflation dropping and then interviewing people who were, surprisingly, saying that they weren’t feeling any better off or seeing any prices coming down. Well, that’s because, the rate of inflation is slowing but it is still going up, so NOTHING is going to get cheaper. I wish the BBC would make that clear – the rate of inflation rise is slowing but the trajectory is always up, which means that prices are also going up, just not as quickly as before. The only time you might expect to see prices falling is if the rate of inflation was -1 or -3, in which case we’d call that deflation and not inflation. None of the “slowing of inflation” is going to allow people to keep more of their cash in their pocket – the only thing that would do that would be a rise in their pay that outstripped inflation or else the supermarkets deciding to cut prices on some goods, but even then, the price of those “cut price” goods is still higher than it was a year ago, and always will be.
In fairness, Ed Balls challenged Laura Trott on this yesterday
Is this the neoclassical economics so comprehensively busted time over time again? Is this the inflation created by events external to the country, or Brexit, or price gouging? How is the war in Ukraine, increasing energy prices at the source (e.g. oil), idiot political decisions or company profiteering affected by interest rate changes? Asking for a friend called Groucho.
PS I live by the M6 Toll Road, and if I come home from work using that (one exit to the next) the cost until a couple of weeks ago was £5.80. Following ‘pricing revisions’ it is now £7.40, a 27.5% increase. Price gouging?
This in an email today from the Equality Trust:
https://twitter.com/equalitytrust/status/1780929333667746065
Thanks
I might well use this