interest rates go up again!

Interest rates go up again. They say it will go up again next month too. When will they peak?

Good news for any saver's but bad news for those with mortgages and bank loans/ paying minimum monthly payments to credit cards.

The bank of England governor will decide whether to raise it again next month when the latest inflation figures are released in due course. When you have him saying that inflation will be slow to come down but the UK government saying it will be halved by end of the year so who'll be right about it I wonder 🤔🤔.

They will come back down once things are under control with the economy but the thing is when it will happen.

Reply 2

Quady

Original post by Kutie Karen

Interest rates go up again. They say it will go up again next month too. When will they peak?

Peak might be in the 2030s.

Reply 3

Quady

Original post by Tracey_W

The bank of England governor will decide whether to raise it again next month when the latest inflation figures are released in due course.

I thought it was the Monetary Policy Committe that decided.

Reply 4

davros

Original post by Kutie Karen

Interest rates go up again. They say it will go up again next month too. When will they peak?

Problem is that the BoE have allowed interest rates to get the "wrong side" of inflation, so now they're playing catch-up. Interest rates should be above inflation so people get a positive return on their savings and are encouraged to save - e.g. for house deposits, or emergencies / unforeseen circumstances, or just generally for retirement. If base rate had been 10.5% when inflation was 10.4%, then the base rate could have come down to 10.2% when inflation "fell" to 10.1% last month, so you would actually be seeing base rate reductions already!

Going back, the BoE held rates at an unsustainably low level for about 15 years, encouraging people to over-borrow and actively discouraging saving. Then when inflationary pressures built up after the lockdowns were over they were really slow to respond. They've also made some wildly inaccurate predictions about recessions, "5 quarters of negative growth" and all sorts of other nonsense, so they've talked themselves out of taking tough enough measures early on!

Really hard to second-guess things at this point. As a saver I'm really happy that rates are rising, although banks aren't passing on the full base rate rise to savers which is pretty poor behaviour. I can't see rates falling this year because the latest "predictions" - for what they're worth - is for inflation still to be around 5% at year end, which is still way above the target level of 2%. And with people asking for 5 or 6% pay rises (or more) there will still be inflationary pressures in the system - labour costs go up => manufacturing and service prices go up => inflation!

There's some interesting historical detail on the BoE website - you can see how ridiculously low interest rates have been in recent years compared to the 1970s/80s/90s when inflation was at comparable levels to today:

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp