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A risk too far?

How would interest rate rises fuel inflation?
People spend less, prices fall...isn't that the theory?
Rates rise for businesses as well. Products go up to compensate. Workers want more pay to compensate etc etc.
Combined with more rented properties that are now privately owned by the Buy to Let market whereas previously most rented property were Council owned who couldn't instantly pass on rent rises.
 
How would interest rate rises fuel inflation?
People spend less, prices fall...isn't that the theory?
It may be the case that more and more prices have borrowing baked into them.
Increasing interest rates are probably fuelling rent rises.
Could it be that this also applies to many of our other goods and services, because so much of our supply chain relies on borrowing?
 
Yes of course, that's basic monetary theory. A bit of a recession is usually the way to drive inflation down (Jeremy Hunt said as much last week). Despite the fact that a lot of people are finding it hard to get by, there's also a bunch of people who built up cash during the pandemic and who have had no incentive to save it at zero return, so have been spending it instead. The Bank of England left it too late to edge up rates, unfortunately (easy for me to say in retrospect of course).
It’s very basic. Even in the 90s it was a sledgehammer to deseed a pomegranate!
 
In addition to mortgages higher rates make company borrowing more expensive reducing investment and growth, making them hire less or lay people off, people who are worried about losing their job are less likely to ask for a pay rise.

The basic plan is to save people from inflation by making them redundant.
 
Its in the general chit chat not the California or a directly related section. I found it very informative and interesting - particularly the bit about old rental houses having to achieve higher and perhaps unattainable levels of insulation in the future !
I think the insulation thing has been kicked back to 2028 earliest.
 
As the main driver for inflation has been fuel & energy costs, if the Govt just lowered taxes on those it could lower inflation without hurting anyone.
Unfortunately I don't think it's as simple as that. Yes energy costs drove up inflation at the beginning but 'core' inflation (which excludes fuels and food) has now taken hold, sustained in the UK by structural weaknesses especially the labour shortage and, in the even longer run, chronically low investment rates.
 
I think the insulation thing has been kicked back to 2028 earliest.
Still need to get to "E" energy rating currently unless you get an exemption. The move to "C" or better is now 2028.
 
Unfortunately I don't think it's as simple as that. Yes energy costs drove up inflation at the beginning but 'core' inflation (which excludes fuels and food) has now taken hold, sustained in the UK by structural weaknesses especially the labour shortage and, in the even longer run, chronically low investment rates.
and printing money
 
Unfortunately I don't think it's as simple as that. Yes energy costs drove up inflation at the beginning but 'core' inflation (which excludes fuels and food) has now taken hold, sustained in the UK by structural weaknesses especially the labour shortage and, in the even longer run, chronically low investment rates.

UK energy prices rose by 110% since the invasion of Ukraine compared to Europes 80% and US increase of around 30%.
We’ve had the toughest time out of the G7 with regards to energy.
 
Approx 37% of the population have a mortgage, they are worse off, some to the point of needing payrises just to pay the bills.

The other 63% are not affected by the interest rate change unless they have savings in which case they could be better off & have more to spend.

At the risk of bringing on more resentment against Boomers, that is spot on.
I don’t have a mortgage, so am not affected by rising interest rates.
Although energy bills went up, that was cushioned for boomers by an increase in the the winter fuel allowance from £200 to £500.
Then I got a 10.1 % increase in the State Pension in April.
I am not saying this to gloat, just stating the facts.
The only long term solution to unaffordable housing for young families as I see it is to build more affordable houses, on the Green Belt if necessary. Wasn’t the whole country Green Belt before they built houses and factories on it ?
 
I think the insulation thing has been kicked back to 2028 earliest.
It is - but just the idea of it plus all the other stuff (treatment of interest, evictions) they were doing on the landlord front and the noises coming from the Government prompted me to get rid of my rented property (large Victorian villa ). It could never meet the required regulations and when we lived in it used to cost a fortune to heat (loads of windows/ glass and draughts).

Just completed the sale last Friday so a very, very happy man given what has been happening to interest rates. So thank you non California thread .... probably wouldn't have been prompted into action / selling without you !
 
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