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Soaring Interest Rate On The Way: Families Feel The Pain As Prices Rocket

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http://www.thisislondon.co.uk/standard/article-23915233-soaring-interest-rate-on-the-way-families-feel-the-pain-as-prices-rocket.do

Soaring interest rate on the way: Families feel the pain as prices rocket

Joe Murphy and Nicholas Cecil

18 Jan 2011

Homeowners were today warned that interest rates could soar as soon as May after a shock jump in inflation.

Official figures show the biggest rise in the cost of living over a single month in December, putting pressure on the Bank of England to raise interest rates to get a grip on inflation.

The danger of higher mortgage payments comes after soaring bills for food, petrol and household energy heaped pain on millions of households.

The surge in the cost of living takes the Bank's official inflation benchmark, the Consumer Prices Index, to 3.7 per cent — the highest since April. This is significantly higher than the 3.4 per cent expected by the City and almost double the official two per cent target.

Chancellor George Osborne said he backed the Bank of England in its “fight” against inflation, adding: “The pressure on working families with rising prices is a huge concern for everyone and a concern for the Government.”

In a sign that an interest rates rise is on the way, the pound rose one per cent against the dollar, mainly because traders were factoring in the expectation of a rise in the base rate.

Economist Alan Clarke, of BNP Paribas, said: “It confirms my suspicion that the first rate hike will come this year; the only question is how soon. Our call is August, but clearly there is a risk it comes as soon as May.”

He said he believed the Bank would try to hold off rises until next winter but added: “There is clearly a growing likelihood that the Monetary Policy Committee will act earlier than the fourth quarter and possibly even before mid-year.”

Inflation has now remained above the two per cent target by one percentage point for more for 13 months.

Retail Prices Index inflation — which includes mortgage interest payments — rose to 4.8 per cent from 4.7 per cent. The figures include the effect of last January's VAT rise from 15 to 17.5 per cent under Labour, but are too early to include the latest rise to 20 per cent ordered by Chancellor George Osborne.

Among the prime causes of the inflation leap, the big freeze pushed up the price of vegetables as supplies were disrupted.

Cauliflowers were particularly badly hit by the weather, said the Office of National Statistics, leading to a 75 per cent rise in prices.

Most bread and cereals went up after wildfires wrecked Russia's harvest and triggered an export ban.

Gas price rises pushed up the cost of household services by 1.4 per cent. Five of the “big six” energy firms — Scottish & Southern, Scottish Power, British Gas, npower and E.ON — have all unveiled increases to domestic bills in the last two months.

Petrol prices also continued to rise to £1.22 per litre, the ONS said — pushing the cost of filling up a modest family car to more than £60.

Air fares were up by 41.8 per cent between November and December, compared with 41.7 in the same period a year ago. Labour said families were being hit daily by higher prices and now VAT. Shadow chancellor Alan Johnson said: “That's why the Government's decision to raise VAT is so damaging — it is an economic strategy based on hitting families' living standards.

“David Cameron has already said that the Bank of England faces an extremely difficult task'.

“The question for him is why has he made that job more difficult with a VAT rise.” A Treasury spokesman said: “Monetary policy is a matter for the Bank of England.

“As the Bank has explained, the current levels of inflation reflect one-off impacts such as the rise in VAT in January 2010, and rises in global commodity prices related to the fast-growing world economy.”

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And there's more…

http://www.thisislondon.co.uk/standard/article-23915075-bank-pressured-by-inflation-rise.do

Bank pressured by inflation rise

A bigger-than-expected rise in the cost of living in December has piled pressure on the Bank of England to raise interest rates in an effort to curb spiralling inflation.

The Consumer Prices Index (CPI) rate of inflation surged to 3.7% last month, its highest level since April and up from 3.3% in November, the Office for National Statistics (ONS) said. Economists were expecting the rate to rise to 3.4%.

Surging food costs, nudged up by the weather disruption, energy bills and petrol prices led to a month-on-month prices increase of 1% between November and December, the biggest monthly rise since records began in 1996, the ONS added.

The Bank, which is tasked with bringing inflation down to its 2% target, has resisted lifting interest rates from historic lows of 0.5% as the wider economy battles with slovenly growth. The rate of CPI has been above its 2% target every month since November 2009.

Policymakers at the Bank's Monetary Policy Committee (MPC) believe the stubbornly-high inflation is being caused by temporary factors, such as spikes in commodity prices and January's VAT rise from 17.5% to 20%.

As the Chancellor's belt-tightening austerity measures start to kick in, the Bank will be under further pressure not to throw the fragile recovery off course.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Despite the undeniably significant risk to growth coming from the fiscal tightening that is now increasingly kicking in, there is mounting pressure on the Bank of England to enact at least a token near-term interest rate hike to send out the message that it has not taken its eye off the inflation ball."

But Philip Shaw, chief economist at brokers Investec, said a rate rise would put the recovery at risk. He said: "A sharp increase in rates certainly seems unjustified but any hike in rates at all now is potentially dangerous."

Brian Hilliard, economist at Societe Generale, said despite the pressures, he did not expect an interest rate hike next month.

He said: "The BoE has already predicted in the December minutes that the inflation rate would touch 4% in the spring so is unlikely to be bounced into a February rate increase by today's data or by January's, which should be provided to the MPC in time for that meeting."

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Chancellor George Osborne said he backed the Bank of England in its “fight” against inflation, adding: “The pressure on working families with rising prices is a huge concern for everyone and a concern for the Government.”

What a lying twunt. :lol:

He's just put up VAT. Fiscal tightening whilst leaving rates lower are part of his strategy to impoverish the plebs whilst recapping his millionaire chums like Bob Diamond. Did it somehow not occur to the knob-nosed silver spoon that raising VAT would increase prices?

Astonishing.:blink:

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Cant believe this comment, obviously one of Labours deeper thinkers

So putting up interest rates up for borrowers = the poor and putting up interest rates for savers = the rich, sounds about right for the Tory party, the poor pay more to keep the rich richer, are you really surprised! hand on heart, really?

- Steve, london, 18/01/2011 17:15

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People are hurting out there - here - in the real World whilst banksters, the BOE and journos live in la-la-land.

The Bankrupt of England are not fighting inflation - they dumped 70% of their pensions into TIPS and then dumped rates - that's market manipulation on a grand scale for your own benefit.

They haven;t got a clue about the real economy or in fact their fake one either.

Edited by OnlyMe

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Worse still is the article in the London Evening Standard 18.1.11 by Anthony Hilton.

Not on the internet.

The man is a total nincompoop. He seriously sees inflation(modest) as not a problem because wage increases will erode the inflation.

The man is old enough to remember the 1970's. I know because I used to know his younger brother.

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http://www.thisislondon.co.uk/standard/article-23915233-soaring-interest-rate-on-the-way-families-feel-the-pain-as-prices-rocket.do

Soaring interest rate on the way: Families feel the pain as prices rocket

Joe Murphy and Nicholas Cecil

18 Jan 2011

Homeowners were today warned that interest rates could soar as soon as May after a shock jump in inflation.

Official figures show the biggest rise in the cost of living over a single month in December, putting pressure on the Bank of England to raise interest rates to get a grip on inflation.

The danger of higher mortgage payments comes after soaring bills for food, petrol and household energy heaped pain on millions of households.

The surge in the cost of living takes the Bank's official inflation benchmark, the Consumer Prices Index, to 3.7 per cent — the highest since April. This is significantly higher than the 3.4 per cent expected by the City and almost double the official two per cent target.

Chancellor George Osborne said he backed the Bank of England in its “fight” against inflation, adding: “The pressure on working families with rising prices is a huge concern for everyone and a concern for the Government.”

In a sign that an interest rates rise is on the way, the pound rose one per cent against the dollar, mainly because traders were factoring in the expectation of a rise in the base rate.

Economist Alan Clarke, of BNP Paribas, said: “It confirms my suspicion that the first rate hike will come this year; the only question is how soon. Our call is August, but clearly there is a risk it comes as soon as May.”

He said he believed the Bank would try to hold off rises until next winter but added: “There is clearly a growing likelihood that the Monetary Policy Committee will act earlier than the fourth quarter and possibly even before mid-year.”

Inflation has now remained above the two per cent target by one percentage point for more for 13 months.

Retail Prices Index inflation — which includes mortgage interest payments — rose to 4.8 per cent from 4.7 per cent. The figures include the effect of last January's VAT rise from 15 to 17.5 per cent under Labour, but are too early to include the latest rise to 20 per cent ordered by Chancellor George Osborne.

Among the prime causes of the inflation leap, the big freeze pushed up the price of vegetables as supplies were disrupted.

Cauliflowers were particularly badly hit by the weather, said the Office of National Statistics, leading to a 75 per cent rise in prices.

Most bread and cereals went up after wildfires wrecked Russia's harvest and triggered an export ban.

Gas price rises pushed up the cost of household services by 1.4 per cent. Five of the “big six” energy firms — Scottish & Southern, Scottish Power, British Gas, npower and E.ON — have all unveiled increases to domestic bills in the last two months.

Petrol prices also continued to rise to £1.22 per litre, the ONS said — pushing the cost of filling up a modest family car to more than £60.

Air fares were up by 41.8 per cent between November and December, compared with 41.7 in the same period a year ago. Labour said families were being hit daily by higher prices and now VAT. Shadow chancellor Alan Johnson said: “That's why the Government's decision to raise VAT is so damaging — it is an economic strategy based on hitting families' living standards.

“David Cameron has already said that the Bank of England faces an extremely difficult task'.

“The question for him is why has he made that job more difficult with a VAT rise.” A Treasury spokesman said: “Monetary policy is a matter for the Bank of England.

“As the Bank has explained, the current levels of inflation reflect one-off impacts such as the rise in VAT in January 2010, and rises in global commodity prices related to the fast-growing world economy.”

well f..k it everything else is gone up

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Worse still is the article in the London Evening Standard 18.1.11 by Anthony Hilton.

Not on the internet.

The man is a total nincompoop. He seriously sees inflation(modest) as not a problem because wage increases will erode the inflation.

The man is old enough to remember the 1970's. I know because I used to know his younger brother.

It's up now: LINK

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Homeowners were today warned that interest rates could soar as soon as May after a shock jump in inflation.

They'll be saying that May would be an "early" increase in interest rates - 5 months hence.. There's A TIME LAG before any increase in base rates takes affect, maybe 6 months to a year or more.

With present policies if the Coalition does last it's full term upto around 2015 it'll be a good laugh about what signed manifesto promises and pledges they all make to try to deal with inflation well into double figures - at least.

The election debates on TV should be real comedy gold, even more so than those last year :lol::lol:

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Worse still is the article in the London Evening Standard 18.1.11 by Anthony Hilton.

Not on the internet.

The man is a total nincompoop. He seriously sees inflation(modest) as not a problem because wage increases will erode the inflation.

The man is old enough to remember the 1970's. I know because I used to know his younger brother.

It's exactly the same sort of crazy logic they and their ilk published in the 1970's. Just a little 5% inflation is good for the economy :lol::lol:

The crazies inflation eventually led to the collapse of the UK's economy and the UK economy is in a far far more fragile condition now.

Edited by billybong

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It's exactly the same sort of crazy logic they and their ilk published in the 1970's. Just a little 5% inflation is good for the economy :lol::lol:

The crazies inflation eventually led to the collapse of the UK's economy and the UK economy is in a far far more fragile condition now.

I moan about the idiots in charge I do, but I'm being a bit hypocritical. If they were actually doing the right thing I would probably lose out big time.

Go BoE!!! Go coalition!!!

Edited by General Congreve

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It's up now: LINK

As the economists Franco Modigliani and Robert Solow suggested 30 years ago, society as a whole probably functions better and is happier with 5% inflation and 5% unemployment than with 1% inflation and 9% unemployment.

huh.gif

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http://www.telegraph.co.uk/finance/comment/damianreece/8267829/Borrowers-have-had-their-time-in-the-sun-this-is-the-year-of-the-Bank-Rate-rise.html

Borrowers have had their time in the sun, this is the year of the Bank Rate rise
After two years – 2009 and 2010 – of bubble economics, inflated by £200bn of quantitative easing and sustained by negative real interest rates, 2011 always looked like the year rates would start to rise.
Those legions of borrowers on variable-rate mortgages who, we are warned, will be hit by an increase in rates have enjoyed an extraordinary run of ultra-low rates in recent years – rates that were certainly never meant to be anything other than emergency measures. And like any emergency measure, they were also meant only for the short term. The only debate now seems to be first half or second?
Fund managers at M&G reckon the market is pricing in three rate rises this year with the first in June. David Tinsley, an economist in London for National Australia Bank and who used to work for the Bank of England, points to April or May, according to Bloomberg.
A school of "do nothing" economics still persists
and I admit that insisting rates should remain at 0.5pc does offer a secure-sounding comfort zone.

If the jobs numbers are weak Merv and the lads will persist with vigilance IMO. The pricing in of 3 rate hikes this year is doing wonders for £ as it rises against all currencies making an export led recovereh even more difficult but helping make Chinese tattersall cheaper.

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Worse still is the article in the London Evening Standard 18.1.11 by Anthony Hilton.

Not on the internet.

The man is a total nincompoop. He seriously sees inflation(modest) as not a problem because wage increases will erode the inflation.

The man is old enough to remember the 1970's. I know because I used to know his younger brother.

That's the trouble. In the 1970s inflation DID erode debt. But that only works in a closed system. We live in a globalised world. If UK widget makers get a 20% payrise I'll buy my widgets from a foreign widget maker. Unless the entire world agrees to inflation only price inflation will happen, not wage inflation.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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