Are UK Inflation Figures Beginning To Rise Out Of Control?
December saw inflation rates in the UK soar by an entire percentage point, up from 1.9% Brand Levitra in November to 2.9% in December. At the end of the month of December the UK government reverted the VAT rate from the temporary reduced level of 15% back to the earlier 17.5% rate. A small rise in costs on the face of it, but over all, taking all VAT chargeable items into account, that move along with the claims that numerous major shops quietly increased prices by more than the formal rise in VAT means that it is almost undeniable that prices have gone up more still in January.
So what level will that leave the January inflation figures showing? No doubt, no less than 3.0%, possibly well over 3.0%.
Does this mean that UK inflation figures are racing away out of control and what does it suggest for the regular person? Well, several big lending banks are having to put up their standard variable rate mortgage rates. Why is this the situation if interest rates are level and their lowest on record? The answer is reasonably plain. The banks must attract a lot of new savers and in a lot of cases they can only attract them by offering decent savings interest rates. Savers carefully investing in accounts paying 0.5% are losing a small fortune when the inflation figure is charging towards the 3.0% mark. In actual terms, they are in fact losing 2.5% of their hard earned investment by keeping their cash locked away in the bank.
As a result, these vigilant savers are having to look around carefully and with promising government backed savings and lately rescued banks being able to afford to pay out higher interest rates, other banks must raise the cash to follow suit. And there is only one obvious way of doing this – raising the basic interest rates that they are charging their borrowers who have been the beneficiaries of record low rates for a long time.
This sudden and unexpected rise in the standard variable rates along with the pound’s gradually rising recovery on the crucial international money markets might just be the prompt that the controlling Bank of England’s monetary policy committee may see as the grounds to start to raise the base rate gradually after months of stagnation. They might want to manage spending whilst having to defend the wealth of savers from losing out on their precious investments. Their only device for controlling this would be to rise the base rate at a snail’s pace.
Certain observers think that the anticipated base rate increase must come at some point in the future and that if it is sooner rather than later, it could reduce the ultimate pain of the interest rises. They fear that if the interest rates are not raised in the near future, then they may have to raise a lot more in later months. Only time will tell.
Keith writes on behalf of CompareMortgageRates.co.uk where you can read loads of articles about how to compare best rates.
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