Forum Topic

Base rate

base rate up again to bring inflation under control by reducing our spending. I'm no economist but considering what's driving inflation, ie food costs, fuel, utilities, etc and not consumer spending, it seems daft to be adding massive rises in mortgage costs to peoples problems. The large rises in utility bills will start to drop out of the inflation numbers in the spring so inflation will come down anyway (I dont know when or by how much wage inflation will affect this). With further base rises rate expected, it seems a major recession is being created by the BoE, houses prices will fall hard, repossessions will soar as will unemployment as the high street is crucified by people's lack of disposable income. The BoE is hell-bent on bringing inflation under control at any cost, I think they have got it badly wrong and should have held the bast rate at about 3% as mortgage increases are going to break many families

Adam Tripp ● 1226d19 Comments

Presumably Adam you gave heard if the energy cap where govt limits the amount an average user will pay for gas. Additionally we are all receiving £66 a month off our Bill's for the 5 winter months ( on most cases paid direct to the supply company) . Those of us that receive the £200 winter fuel allowance have seen that rise to £500 this year ( per household,) and yesterday it was confirmed that thus will re occur next year. So whilst gas prices may be lower than kadt tear thaf are still much higher than 2 tears ago hence these various schemes to help. Not saying these are the total answer but before individual household Bill's see a reduction the price would need to drop below all these subsidies that we as tax payers are funding for all, some, those qualifying.

Andy Pike ● 1210d

The MailOnline is calling the Standing Charge a stealth tax.  In the past year the average standing charge has increased from £186 to £273 per year.

Martine Guy ● 1211d

sorry, I'm not up to speed on the standing charge or protected level issues

Adam Tripp ● 1211d

Is the price per therm below the protected level yet? Consumer prices will not fall on Bill's until the protected levels are reached.

Andy Pike ● 1211d

Adam, the gas might be cheaper, but isn’t the standing charge going up?  

Martine Guy ● 1211d

today's papers picking up on the fact that gas is cheaper than a year ago but no consensus as to when (or if) consumers will see the benefit

Adam Tripp ● 1211d

Andy, in fairness the thread is headed "base rates" so I was addressing that aspect of the discussion and, yes, it's not unreasonable I should address what I see as one of the causes of the UK's reduced control. (If Farage, Rees Mogg et al stopped spouting their nonsense perhaps others would be less annoyed about the damage they've done?)Inflation caused by rising prices surely has a number of causes: increased salaries caused by a shortage of labour, rising fuel costs because of shortages resulting from the Ukraine war, transportation costs increasing because of containers being in the wrong place after Covid lockdowns, supply problems from China's long zero Covid policy causing demand price increases, ... My understanding is that although spot wholesale energy prices may have dropped energy companies usually buy ahead so that energy products currently being supplied were purchased at a higher price? Isn't that why energy producers - rather than suppliers - are normally the target of windfall taxes as they (and possibly traders) are the main beneficiaries of high prices driven by shortages? Not that I'm trying to justify high prices or interest rate adjustments - there does seem to be a reluctance to reduce prices or adjust retail interest paid on credits or reduce that paid debits as fast as base rates or wholesale prices change.

Michael Ixer ● 1212d

Thank you Michael, but my question was about the posts that suggest domestic prices should reduce on the back of 2022 reduction in wholesale price. But I think that is still higher than the price in 2o21 that prompted govt intervention. Nothing to do with taking control though I applaud your determination to get it in every post even if irrelevant to the question asked.

Andy Pike ● 1212d

Andy. The BoE is essentially following the US Fed rate. The idea of the UK being in or taking back control is a nonsense, we're driven by world markets (as Truss and Kwartang found out), and the US is the largest player in those; I believe the UK is now #6 following India's rise to 5th place. One could argue that being in the combined EU market gave us more clout in international markets - provided we agreed and cooperated with our partners :-) Still, c'est la vie, and an interesting prediction I saw on LinkedIn: "2022 saw the fastest cycle of interest rate hikes in US history; the Fed funds rate is likely to peak at around 5% in the second quarter, while the UK bank rate will likely peak at between 4% and 4.5% in the third quarter."

Michael Ixer ● 1212d

certainly makes a change finally after a long long time get a better rate of interest on any savings you might have. 2 years a 4.3%.

Paul Beer ● 1212d

I stand to be corrected but the first quarter gas price in 2022 was 3 times as much as the same period in 2021. Whilst it has certainly fallen since then, will it affect our bills? Or is it still above the protection level set by the govt? Ie it will reduce the govt bill for subsidy which is good. Does it have to fall further for us to actually see any bill reduction? Serious questions

Andy Pike ● 1213d

Adam - thanks. I agree with you about the base rate lags, and the same as regards gas and electricity prices and how slowly they adjust. The Bank and the Regulators seem to be asleep.Nick

Nicholas Evans ● 1213d

Hi Nick, wholesale prices take time to feed through to consumers, we should see our bills come down but honestly I couldn't say when. I mentioned this as a follow up to my scepticism regarding the base rate rises which imho are unnecessarily aggressive given that fuel prices are the source of inflation and not consumer spending. Of course, the MPC is full of highly qualified, highly paid experts whereas I am just a keyboard warrior :)

Adam Tripp ● 1213d

Adam, if that is the case can you explain why gas and electricity prices have not gone down?Nick

Nicholas Evans ● 1213d

That is good news!However, I expect that corporate profits are not allowed to decrease?  (Miaw)

Ivonne Holliday ● 1213d

fyi - the wholesale price of natural gas and Brent crude is now LESS than it was in January 2022

Adam Tripp ● 1213d

Why don't you say you will be made much poorer if interest rates go up. Hiding behind virtue signalling is not a good look. I see you couldn't give a stuff about savers, just think about yourself.Talk about entitlement.

Paul Rolink ● 1223d

I agree. I assume some of the increase is to protect the pound.Having low interest rates are relatively recent. The question is how high will they go?https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

Ed Robinson ● 1225d

… and the banks are remarkably slow at increasing their savings rates.Nick

Nicholas Evans ● 1226d