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OzzMosiz

Inflation & Savings

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I'd be interested to know if anyone has contacted the BoE to ask if they think savers money

is being eroded by the inflation figures

I dare someone :lol:

Edited by OzzMosiz

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Yes. I had a reply from them on that very point. They truly believe inflation is low.

An extract from their email reply is below:

More generally, interest rates for both borrowing and saving are lower now than in the 1970s and 1980s because inflation is also much lower. Thus, there is no need to raise rates to counteract inflation, nor to keep rates high. Thus in the past although saving rates were higher than now, you must remember that the real rates of returns on savings were actually much lower as the purchasing power of the interest earned was eroded by high inflation. For example, if saving rates were at 12.0% and inflation was at 10.0% then the real return on savings would be just 2.0%. Similarly, if interest rates are at 4.5% and inflation stands at 2.3%, the situation at present, then the real return on savings is 2.1% broadly similar.

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Yes. I had a reply from them on that very point. They truly believe inflation is low.

An extract from their email reply is below:

Yes BUT... high interest rates favour SAVERS not borrowers. I'd rather have 12% savings and 10% inflation and a housing market in severe recession than 4.5% savings and 2% inflation and runaway HPI.

Come on...

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  • 301 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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