Interest Rates Rise As Inflation Soars At Fastest Pace For 10 Years

Interest Rates Rise As Inflation Soars At Fastest Pace For 10 Years

Interest Rates Rise As Inflation Soars At Fastest Pace For 10 Years

The Bank of England has raised base interest rates for the first time in more than three years, in response to surging prices and an official inflation rate of 5.1%.

The increase to 0.25% from 0.1% followed data this week that saw consumer prices, used to measure the UK inflation rate, climbing by the fastest rate for 10 years.

Eight of the nine Monetary Policy Committee members voted to increase interest rates despite the Omicron variant slowing down an already weakened economy by causing people to spend less during the Christmas season.

The Bank’s action will increase mortgage costs of homeowners and businesses with commercial loans and overdrafts not on fixed rate deals.

If you have not yet fixed your rate you might want to start thinking about doing so. Talk to your financial adviser.

UK inflation is now running at 5.1%, the highest in a decade and double target rates. The bank governor Andrew Bailey expects inflation to rise to 6% further early next year.

The real rise in the cost increase of living is much higher than the official rate, as many of us are experiencing. The sharp rise in wholesale gas prices is driving inflation, and that is continuing to push up domestic energy bills.

Energy and fuel prices affect the cost of all goods and services, as costs have increased for businesses and suppliers. Wholesale prices of raw materials and commodities have also gone through the roof this year.

Inflation is rising around the world fuelled by ‘money printing’ by central banks on a scale never seen in modern history. The official US inflation is now 6.8%, the highest for over a decade, but half the rate suggested by Shadow Stats which claims real costs are rising by 15%.

The newly raised rates will increase the cost of buying a home, although they are still near the historic low and unlikely to affect property prices and housing demand unless rates rise further.

The FT reports that Fed officials expect three interest rate rises next year to combat rising inflation.  The markets went up following the announcement!

If you think you will not be adversely affected by interest rates going up, think again. Governments owe trillions of dollars, pounds and Euros to bondholders and will have to pay higher interest rates to service the debt they created. Who do you think is going to pay the interest? That’s right, taxpayers.

Savers will welcome the news as they will earn slightly more on their savings deposits in banks currently earning next to zero.

Don’t get into debt this Christmas

A friendly warning to avoid spending money you don’t have and getting into debt this Christmas, especially with higher credit card rates on the way.

On solution could be to hold a family ‘truce’ on presents or values, or opt out of the spending spree altogether if you can. You can still have a good Christmas without getting into debt and paying for it for it next year.

Financial education in investing is the key to building and keeping wealth. Never stop learning!

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