Up, up and away

[_V_]

http://news.bbc.co.uk/1/hi/business/6562723.stm

I think we will be at 6% interest rates by the end of the year.

[Troll]

Interest rates are only useful as a weapon if the inflationary pressures are pay related.

If:
monopolistic companies are allowed above inflation increase
you hike taxes on essential goods
you allow local government to inpose above inflationary council tax rises

then suprise suprise... inflation will go up!

I just can't see how hiking the interest rate helps at all

Please enlighten me

[Numptycorner]

Interest rates are only useful as a weapon if the inflationary pressures are pay related.

If:
monopolistic companies are allowed above inflation increase
you hike taxes on essential goods
you allow local government to inpose above inflationary council tax rises

then suprise suprise... inflation will go up!

I just can't see how hiking the interest rate helps at all

Please enlighten me

Because the main reason for inflation (hidden inflation) is house price increases. Put interest rates up to 8%, that should cure the problem.

[Captain Dispensable]

Don't worry the bank of england are writing a letter to the government to explain it all. Supposedly being released at 10.30am. Better get the pop-corn out it might be good. Unlikely though, just more bs.

[wendigo100]

Interest rates are only useful as a weapon if the inflationary pressures are pay related.

If:
monopolistic companies are allowed above inflation increase
you hike taxes on essential goods
you allow local government to inpose above inflationary council tax rises

then suprise suprise... inflation will go up!

I just can't see how hiking the interest rate helps at all

Please enlighten me

It is not just wage increases that increase spending. People are borrowing to spend, like never before. Interest rate rises should slow this down.

[milanbenes]

I heard that people aren't just borrowing to spend, they're borrowing to pay off their debts !

Milan.

[VectraMan]

It is not just wage increases that increase spending. People are borrowing to spend, like never before. Interest rate rises should slow this down.

And a lot of people are feeling wealthy because of all the equity they have in their properties. I don't think small interest rate rises are going to make a difference. So many people believe the values of their property is 100% safe, they won't be scared by a small rate rise. It'll take a house price dip to do that.

Is there a good economic reason for not including house prices in inflation calculations? If you did, what'd be the true inflation value? 10-15%?

[Troll]

The largest upward effect on the CPI annual rate came from food and
non-alcoholic beverages.
Shop-bought milk prices increased by over
2 per cent in March, compared with a fall of around 8 per cent last
year when widespread reductions were led by supermarket chains.

Small upward effects came from bread and cereals and meat, where
prices rose in March but fell a year ago. A partially offsetting
downward contribution came from fruit, as prices fell by more than a
year ago.

Further large upward effects came from:
• Furniture, household equipment and routine maintenance,
where prices for furniture and furnishings rose by more than a
year ago, showing a record monthly increase of nearly 10 per
cent in March, in the lead up to Easter special offers. There
was also a large upward effect from major household
appliances, where prices rose in March but fell a year ago;
• Recreation and culture, where upward contributions came from
games, toys and hobbies, with prices for computer games
increasing this year but falling a year ago, and cultural services,
where admission prices for theatres and live music events rose
in March but fell last year; and

• Transport, where petrol prices rose by nearly 2.5 pence per litre
in March compared with little change a year ago. Partially
offsetting small downward effects came from air and sea fares,
both of which fell in March.

Small upward contributions came from clothing and footwear and
restaurants and hotels, where prices in March rose by more than a
year ago.

A large downward effect on the CPI annual rate came from housing
and household services, mainly due to gas and, to a lesser extent,
electricity. Some new reductions in gas tariffs recorded in March
offset the continued phasing in of increases in others, leading gas
prices to fall over the month. In March 2006, tariffs for both gas and
electricity rose by around 3 per cent.