Last week saw the fourteenth in the longest and most aggressive series of Base Rate rises since the 1980’s, with a 6-3 vote to cement the biggest fall in household wealth since 1945.
‘Lower for Longer’ has been replaced by ‘Higher for the Horizon’ as inflation has outpaced earnings growth for 20 consecutive months curtailing consumer cravings. The UK was the first advanced economy to raise rates but the last to leave double digit inflation rates behind.
Mr Sunak’s pledge to halve inflation in the MPC’s hands, a rise was inevitable but economic commentators of all stripes appear united on the risk of overdoing it, UK Plc cooling rather than chilled, ‘X’ (formally Twitter) polled 76% respondents favouring no increase. Bizarrely 24 hours before last week’s quarter point rise both mortgage approvals and consumer credit jumped.
The inflation conundrum leaves policy makers in search of a new theory. Inflation is omni-present until shoppers say ‘no’, reportedly 60% consumer basket products have inflation greater than 5%, war and weather have replaced traditional expectations and are set to keep prices higher, so Governor Bailey’s interest rates are less effective here.
California Dreaming’ – ‘On such an interesting day!’
Mr Sunak may be holidaying in the ‘Golden State’ but he must be mindful of the 1967 hit – ‘leaves are brown, and the sky is grey’ – Voters rarely reward you for making them poorer. With 1.3 million fixed rate mortgage deals expiring in 2023, add in the first falls in house prices since 2012 we are soon to become the land of the lodger!
Coupled with a stealthy 40% increase in higher rate taxpayers and an additional £6.6 billion raised from interest on your rainy-day funds, the forthcoming General election may well be fought against a backdrop of uninspiring growth and household incomes clamoring to catch up could well see candidate’s ‘pretend to pray’ as they prioritise fiscal creditability over electioneering giveaways.
Mrs Cossey’s Real World Economics – Exceedingly Good Cakes
Inflation bites, there are now an estimated 10 baked beans less per branded can, Greggonomics fuels a nation with a planned 94 further locations to grab a steak bake, whilst festive ‘Pigs in Blankets’ are at risk with a new round of October EU Border controls looming and the latest supply chain threat, no HGV Mechanics.
Tax still tops the list of dullest conversations, so good news that solar installations are at a 7yr high and ‘Dogger Bank’, the world’s largest wind farm is set to power 6 million UK homes by 2026. With VW putting the brakes on electric vehicles, and motorway charging points without power, its boomtime for the second-hand car market as those favouring net zero drive towards the 2030 EV deadline.
Despite the cost-of-living crisis, holidays remain a top priority. The rise of workcation’s sees Italy zoom in as the preferred destination. With 800,000 Brits abroad in Spain, the UK is exporting inflation with property prices up 8%, a Place in the Sun beckons. That said, it is rumoured that Bognor may be Britian’s Barcelona by 2050 unless the Mayor of London gets to extend the ULEZ scheme nationally.
And finally, with cost input inflation subsiding exceedingly pleasing to hear no planned rises in Mrs Cossey’s favourite – French Fancies!
The opinion expressed in this article are those of the author and do not necessarily reflect the views of any organisations with which the author is affiliated.