It came as a complete shock today. Interest rates up to 5.25%.
Apparently a rate rise in January is a complete shock but there is growing speculation that the rate of inflation is starting to panic the bank of england.
The 3rd rate rise since August, this is starting to cause quite a bit of financial pain to first time buyers of property that have recently over stretched themselves to get on the property ladder.
.... and more interest rate rises are predicted.
It's in line with europe. But it is merely because of excessive spending, couppled with really uncompetitve exchange rates with the rest fo the world. GB is losing money fast, something has to be done
So they raise the Interest rates to curb over zealous property investors.
It is astonishing! UK wants to hold back all the consuming behavior of its inhabitants? Why to that?
Because rampant inflation means poorer people.
They're stopping people from buying things, because in the long run, it means people can buy more
When the economy slows then one way a central bank can try to stimulate things is by dropping interest rates, which promotes spending. This spending isn't just by individuals, it's also by companies which means they can expand, produce more and employ more, thereby stimulating the economy.
Problem is, individuals have been borrowing big time, and what have they been investing in.....? Property.
Result
British citizens are heavily in debt. Per capita we owe more than the US, and property is in a speculative bubble.
As we're in debt we're asking for more money from our employers, but if the employers give us the money then that money enters the economy chasing the same amount of goods or products resulting in inflation.
The central bank's sole responsibility is to control inflation (2% target) and thereby keep the economy stable. The way they do that is by raising interest rates which discourages companies offering higher salaries during the pay review period of the year.
If people don't get their pay rises, they don't spend so much, they don't borrow so much, debt shrinks and inflation pressures reduce to stable growth levels. Well, that's the plan I suppose.
As it is we had a pause in interest rises today, but it looks like we may get one in March...
