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U.K. Interest Rates and Inflation
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By *oo hot OP Couple
over a year ago
North West |
Anyone else think that the BoE should not be putting up interest rates?
This isn’t typical, consumer led inflation. There is already a lack of money on the demand side because of high energy bills.
It should be the Government that is acting to fix this type of inflation as removing yet more cash from the economy has not worked so far and is unlikely to work when inflation is coming from the source.
I see a bit of a catastrophe on the horizon unless the Government and the BoE recognise the very unique nature of this particular type of inflation. |
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By *ercuryMan
over a year ago
Grantham |
Analysts predict another 25 points rise in interest rates.
This could add to recessionary pressures but as inflation comes down more rapidly, then the scope is there to start bringing these rates down.
Another few months of short term pain but hopefully, all worth it in the end. |
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By *oo hot OP Couple
over a year ago
North West |
"Analysts predict another 25 points rise in interest rates.
This could add to recessionary pressures but as inflation comes down more rapidly, then the scope is there to start bringing these rates down.
Another few months of short term pain but hopefully, all worth it in the end."
The point however is that illness cannot be fixed by the medicine that is currently being administered. The current medicine is useful when inflation is being caused by spiralling wages and consumer demand in the retail sector. High consumer demand by people with money to spend causes prices to increase.
This is not what is happening at the moment and that is why increasing interest rates hasn’t worked, and won’t work. Inflation is coming from the supply side, not the demand side. |
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I think one more but I agree they shouldn't as we are in a false economy at the moment.
Oil prices are lower than they were pre war when a litre of unleaded was 1.21.9 since then the government has taken 5p tax off so why are they still around 1.44.9?
Secondly Ofgem should have forced a change in the energy cap not the chancellor.
Again during 2022 the average cost of Gas was over 200 per thermal. For the past couple of months it has been around 100 which is only 20% higher than pre covid so the price cap should have halved. |
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By *irldnCouple
over a year ago
Brighton |
Presumably someone (a consumer group must exist?) is tracking the lag behind wholesale price decreases for gas and oil to see when that is passed on to consumers?
Presumably the lag will be the same amount of time between the point when wholesale prices increased and that being passed on to consumers?
If the time for the reduction is longer than the time for the increase then we are being ripped off. |
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"Presumably someone (a consumer group must exist?) is tracking the lag behind wholesale price decreases for gas and oil to see when that is passed on to consumers?
Presumably the lag will be the same amount of time between the point when wholesale prices increased and that being passed on to consumers?
If the time for the reduction is longer than the time for the increase then we are being ripped off."
Energy prices are expected to reduce by c.25% on 1st July, but I bet they will not reduce the daily rate. |
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"If the time for the reduction is longer than the time for the increase then we are being ripped off."
Energy generators and suppliers buy and sell in advance. Sometimes a month in advance, sometimes a year or more. The price that your supplier is paying today will not be the market price. They might be ripping off their customers, and they might not. The only way to tell is to look at the company's profits at the end of the year. |
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By *AFKA HovisMan
over a year ago
Sindon Swingdon Swindon |
I agree interest rates are a pretty ineffective way... But I'm not sure that they should to still be moved, just not as the only lever
The trouble is the stuff running away have been the basics. Food, energy, housing.
My thoughts are we have been in a bubble. We have relied on supermarkets to bully suppliers, who have just about made ends meet through cheapish energy and cheap labour.
And housing has been flooded by middle England taking leveraged are barely affordable positions on housing on the basis the lack of supply will push up prices. It's borderline speculative.
Both chickens are coming home to roost. My fear is that it is a bubble and so there is nothing to reverse it. And we still have more bursting to go.
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By *oo hot OP Couple
over a year ago
North West |
"I agree interest rates are a pretty ineffective way... But I'm not sure that they should to still be moved, just not as the only lever
The trouble is the stuff running away have been the basics. Food, energy, housing.
My thoughts are we have been in a bubble. We have relied on supermarkets to bully suppliers, who have just about made ends meet through cheapish energy and cheap labour.
And housing has been flooded by middle England taking leveraged are barely affordable positions on housing on the basis the lack of supply will push up prices. It's borderline speculative.
Both chickens are coming home to roost. My fear is that it is a bubble and so there is nothing to reverse it. And we still have more bursting to go.
"
Food and energy are directly linked and housing costs are directly linked to interest rates.
Sort out energy costs by acting like other European nations have and stop putting up interest rates.
This would go a long way to bringing inflation back under control.
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Cpi should come down to.about 4% in September. There's a 9 mo th like on producer price inputs vs actual.
They began decreasing sharply 9 months ago. And so we should feel the benefit in tbe next month( excluding greedy supermarkets)
Energy is still a problem.
But people don't want fracking, don't want gas, don't want nuclear, don't want coal.
But when tbe wind doesn't blow...the uk is fucked.
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By *irldnCouple
over a year ago
Brighton |
"If the time for the reduction is longer than the time for the increase then we are being ripped off.
Energy generators and suppliers buy and sell in advance. Sometimes a month in advance, sometimes a year or more. The price that your supplier is paying today will not be the market price. They might be ripping off their customers, and they might not. The only way to tell is to look at the company's profits at the end of the year."
Err thanks for mansplaining but that was precisely the point of why I said lag!
Assuming the gas I am using today was bought by my supplier a year ago then I get that I will be paying a consumer price based on that gas.
The point is that it *feels* (may not be the case) that when wholesale prices go up this is passed onto consumers quickly (ie the lag is short) but when wholesale prices drop this takes time to be passed to consumers (ie the lag is long) |
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"If the time for the reduction is longer than the time for the increase then we are being ripped off.
Energy generators and suppliers buy and sell in advance. Sometimes a month in advance, sometimes a year or more. The price that your supplier is paying today will not be the market price. They might be ripping off their customers, and they might not. The only way to tell is to look at the company's profits at the end of the year."
Typically thr e energy mrket for.the big 5 is bought 18 months in advance. |
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"If the time for the reduction is longer than the time for the increase then we are being ripped off.
Energy generators and suppliers buy and sell in advance. Sometimes a month in advance, sometimes a year or more. The price that your supplier is paying today will not be the market price. They might be ripping off their customers, and they might not. The only way to tell is to look at the company's profits at the end of the year.
Err thanks for mansplaining but that was precisely the point of why I said lag!
Assuming the gas I am using today was bought by my supplier a year ago then I get that I will be paying a consumer price based on that gas.
The point is that it *feels* (may not be the case) that when wholesale prices go up this is passed onto consumers quickly (ie the lag is short) but when wholesale prices drop this takes time to be passed to consumers (ie the lag is long)"
The energy prices went up very sharply in early 2021. Depending on timing sod the big 5. They'll have had forward rate agreements fro suppliers.
Trouble is
Some of those suppliers were Russia. And we banned purchases.
So then they had to go buy elsewhere.
Some energy prices will have had a quicker rise than others. ( typically why the smaller companies went under)
The big 5 contract went out of date in I think august 22? I got a reminder text at the time tot are one as a lot.of contracts were running gout at thay time. So you wanted to be sure younonly paid for metres gas you used from the rate of the 1st of September or something |
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"Err thanks for mansplaining but that was precisely the point of why I said lag!"
Well I apologise for being a man.
But the point that I was trying to make was that energy is bought in advance, and we don't know how far in advance, or when it was bought. That means that the lag measured on increasing prices probably won't match the lag on decreasing prices, due to different contacts being signed for different lengths of time. |
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By *irldnCouple
over a year ago
Brighton |
"Err thanks for mansplaining but that was precisely the point of why I said lag!
Well I apologise for being a man.
But the point that I was trying to make was that energy is bought in advance, and we don't know how far in advance, or when it was bought. That means that the lag measured on increasing prices probably won't match the lag on decreasing prices, due to different contacts being signed for different lengths of time."
And yet price increases seem to happen fairly concurrently across suppliers but price drops do not? Or am I imagining that? |
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"Err thanks for mansplaining but that was precisely the point of why I said lag!
Well I apologise for being a man.
But the point that I was trying to make was that energy is bought in advance, and we don't know how far in advance, or when it was bought. That means that the lag measured on increasing prices probably won't match the lag on decreasing prices, due to different contacts being signed for different lengths of time.
And yet price increases seem to happen fairly concurrently across suppliers but price drops do not? Or am I imagining that?"
If you take a not of prices now and see where they are in tne next few months you will maybe catch them dropping.
Google ONS producer price inflation.
And you will see from July last year the PPI began going negative. |
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The above is not to say that producers and ships will pass on it all. I dont believe that for 1 second. But there should be a come down in prices.
Maybe put together a shopping basket now.and screenshot.it from tesco online. Then see if those same 20.products come down in price by September? |
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By *eroy1000Man
over a year ago
milton keynes |
"I think one more but I agree they shouldn't as we are in a false economy at the moment.
Oil prices are lower than they were pre war when a litre of unleaded was 1.21.9 since then the government has taken 5p tax off so why are they still around 1.44.9?
Secondly Ofgem should have forced a change in the energy cap not the chancellor.
Again during 2022 the average cost of Gas was over 200 per thermal. For the past couple of months it has been around 100 which is only 20% higher than pre covid so the price cap should have halved."
It is annoying when they blame price rises on the wholesale price going up but when it comers down it does not seem to go back to where it was. That said I would imagine that staff costs from the fuel suppliers play a part. If, like most the staff wanted a got a decent pay rise, would that have an influence on the price they charge for their product? |
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"I think one more but I agree they shouldn't as we are in a false economy at the moment.
Oil prices are lower than they were pre war when a litre of unleaded was 1.21.9 since then the government has taken 5p tax off so why are they still around 1.44.9?
Secondly Ofgem should have forced a change in the energy cap not the chancellor.
Again during 2022 the average cost of Gas was over 200 per thermal. For the past couple of months it has been around 100 which is only 20% higher than pre covid so the price cap should have halved."
Oil isn't cheaper now than pre war.
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Interest had to return to normal one day, and high inflation is as good a kick up the arse to do it as any. (Look into the historical interest rates in the two decades leading up to the financial crash in 2008, they're about 5% to 6%).  |
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By *azylivingMan
over a year ago
swansea / Bristol |
"Anyone else think that the BoE should not be putting up interest rates?
This isn’t typical, consumer led inflation. There is already a lack of money on the demand side because of high energy bills.
It should be the Government that is acting to fix this type of inflation as removing yet more cash from the economy has not worked so far and is unlikely to work when inflation is coming from the source.
I see a bit of a catastrophe on the horizon unless the Government and the BoE recognise the very unique nature of this particular type of inflation."
If you don’t like the interest , don’t take out the loans!  |
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"I think one more but I agree they shouldn't as we are in a false economy at the moment.
Oil prices are lower than they were pre war when a litre of unleaded was 1.21.9 since then the government has taken 5p tax off so why are they still around 1.44.9?
Secondly Ofgem should have forced a change in the energy cap not the chancellor.
Again during 2022 the average cost of Gas was over 200 per thermal. For the past couple of months it has been around 100 which is only 20% higher than pre covid so the price cap should have halved.
Oil isn't cheaper now than pre war.
"
One week before War 18th Feb 22, Brent Oil was $93.5.
For the past 30 days price has been a low of $74.9 a high of $87.3 today it is $81.1.
My Math says that is lower |
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"I think one more but I agree they shouldn't as we are in a false economy at the moment.
Oil prices are lower than they were pre war when a litre of unleaded was 1.21.9 since then the government has taken 5p tax off so why are they still around 1.44.9?
Secondly Ofgem should have forced a change in the energy cap not the chancellor.
Again during 2022 the average cost of Gas was over 200 per thermal. For the past couple of months it has been around 100 which is only 20% higher than pre covid so the price cap should have halved.
Oil isn't cheaper now than pre war.
One week before War 18th Feb 22, Brent Oil was $93.5.
For the past 30 days price has been a low of $74.9 a high of $87.3 today it is $81.1.
My Math says that is lower"
Brent crude in the month build up was about $80 a barrel. Its currently about 80 a barrel..
If you're marking it was when the first invasion began fine. But the uk began preparations much earlier when it was $70 a barrel.
I'm being nice here as well and giving benefit to you in that. Oil is typically bought several months in a dance. Whichbputs the oil price at around $65 a barrel |
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"Analysts predict another 25 points rise in interest rates.
This could add to recessionary pressures but as inflation comes down more rapidly, then the scope is there to start bringing these rates down.
Another few months of short term pain but hopefully, all worth it in the end."
It’s looks like there will be three consecutive 25 point rises not one |
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