As inflation rages higher, the Bank of England announced it was raising its benchmark rate by 25 basis points to 0.75%. One voting member preferred to leave rates unchanged. The BoE said that developments since the February Report are likely to accentuate both the peak in inflation and the adverse impact on household incomes.
CPI inflation is anticipated to peak at around 7.25 % in April with upward pressures on inflation expected to diminish over time.
Cameron Parry, CEO of Tally – a firm that offers a crypto tied to gold, shared a comment on the rising rate environment:
“Although the Bank of England is heading in the right direction, due to inflation exponentially outstripping interest rates, consumers and savers are actually worse off now than they were a month ago. With inflation surging towards 8% and interest rates still well under 1%, it’s easy for consumers to calculate the rate their savings are losing value if they hold their savings in pounds sterling. Nominal rate increases won’t curtail the appetite for cheap credit – which leads to more fiat currency like pounds being digitally created through banks writing loans, increasing GBP in circulation and further devaluing pounds sterling. This is an ongoing cycle that is fuelling runaway inflation. Consumers are caught in a no-win situation when saving in pounds as their money is losing value in real terms by the day – they need an alternative everyday money. Today’s announcement highlights why people are increasingly becoming aware that they need to use something other than fiat currency when it comes to their money, something designed for saving, that they can trust for their future. People are increasingly searching for value in investments as a solution, but if the money they used was sound, money designed to protect and benefit the saver, not the banking system, they could just get on with their busy lives, be productive focusing on what they’re good at and building value for themselves and their families.”
Neil Kadagathur, Co-Founder and CEO of Creditspring an online consumer credit provider said the rate increase was desperately needed but doesn’t go far enough:
“We’re already in a cost of living crisis and the situation is going to get a lot worse when energy bills start to soar and inflation gathers pace. The hope is that this rise slows down the increase in the cost of key goods and alleviates some of the pressure on households whose budgets have taken a battering in recent months. Living costs aren’t rising as a result of monetary policy, but monetary policy could provide a lot more support to those who need it most. And sadly, those who are seeing the real value of their wages stagnate or decline are the ones who will be hit hardest. We’re in danger of creating a generation of people for whom spiraling debt is simply a fact or life. Amongst 18-34 year olds, a third will have to borrow to survive the next few months – this figure will soar in the coming months unless more effective support is offered to the most vulnerable households. Borrowing is set to become more expensive, disproportionately hurting lower-income households and borrowers.”
Kadagathur asked if this was the best time to kick off the National Insurance increase:
“The Chancellor’s statement next week will have to address the elephant in the room – millions of households are struggling to keep their heads above water and additional NI bills, coupled with all the other rises they’ll have to bear, could be the final straw.”
The Bank of England predicts that CPI inflation will decline to a little above the 2% target in two years’ time and to below the target by a greater margin in three years.