Bank of England mirror the Fed with 0.5% Base Rate rise

Great the ninth increase in the BOE base rate in 12 months.
Merry Xmas to all the Landlords out there with Love from the Government.
From 0.1% to 3.5% in 12 months.
Well Mr Khan you may want a rent freeze but your living in cloud cuckoo land.
Heating on and excited to read my Gas will cost 17+pence soon when it was 3.3 pence per unit only 12 months ago. Have a great Xmas guys 🎅😭

I must be totally thick but i do not understand why making everything more expensive is the solution to reduce inflation.
Surely only the banks are going to benefit?
When costs go up naturally suppliers of products and services have to put costs up to stay profitable ( and i suppose reduce costs)
But the fundemental reasons costs have risen so sharply are due to external factors.
It doesnt take a economist to work out when people experience higher prices they look to rheir employer to increase renumeration.
why do 7 “experts” at the bank of England England think adding to the misery by making everything more expensive is the answer to reducing the inflation rate .
A very small number of people are becoming wealthier and wealthier and taling an ever bigger slice of the pie at tge exepense of the rest of us.
I hope someone can explain why putting up interest rates will help combat inflation.

Reply to the comment left by psquared at 15/12/2022 - 13:39I also can never understand why putting up interest rates curbs inflation especially when at present the majority of inflation is caused by external factors i.e. the huge rise in energy and food prices. Inflation historically is caused by too much money trying to buy too few goods and in those situation maybe raising interest rates to curb borrowing might help a little. But this situation is different and the goods people want to buy are fuel - petrol, gas or electricity and most kinds of food produce, all essential items.You are not likely at the moment to go on a spending spree and try and buy more of these products than you need. So the rise in interest rates for most people just causes more hardship. Not for me, and a few like me, who are mortgage free and have substantial cash savings. 6 months ago on an instant access account I was getting 0.6% and now I am getting 2.75%, and if BOE raises rates even more then I will benefit further. The trouble with governments is that they have limited options to tackle inflation and they always trot out raising interest rates as the solution which rarely works. They have to be seen to be doing something even though they know it won't work. If the government really wants to bring down inflation then subsidise fuel and energy prices even more and with more difficulty perhaps work with supermarkets and try to bring in maximum prices for basic items such as milk, butter, bread, chicken etc.

Reply to the comment left by psquared at 15/12/2022 - 13:39I don't understand it either. Raising interest rates fuels inflation rather than reduces it, and increases government debt, so its a lose-lose situation for everyone except the banks who are gaining in all directions.

Following the US is also stupid as 30 year fixed rate mortgages are the norm over there. The main effect on housing will be to slow house price increases over there and only new mortgagees and businesses with loans will be effected.
Here in the UK the impact is catastrophic with everyone on a variable rate impacted and those with short fixes in the firing line soon, affecting most mortgagees and tenants and businesses with loans.
Therefore fueling inflation further.

It would be useful if the government actually came out and said what they want people to do to help reduce inflation.
Do they want us to spend, or save, or cut our fuel use or invest more or what? Clear guidance and a concerted effort could change things. But at the moment these ill thought out policies are making everything worse and presumably reducing investment in all sectors because people don't feel safe.

'It would be useful if the government actually came out and said what they want people to do to help reduce inflation.'
Although they haven't made it very clear it seems that they want all people that work for a living to accept pay rises well below the rate of inflation. As regards coping with the increased cost of living just grin and bear it and try to reduce your expenditure.
It would be sensible for the government to stop encouraging the sale of electric cars especially at a time when power cuts are a possibility. This should never have happenned in the first place unless we knew we could count on a surplus of electricity supply.

Reply to the comment left by KD South East at 17/12/2022 - 08:42
Lease don’t take offence but …… the “mortgagee” is the lender the borrower is the “mortgagor”.

Reply to the comment left by Dylan Morris at 18/12/2022 - 09:57
Thanks for the correction Dylan no offence taken 🙂