Increasing the interest rate to 5%, is this really the fairest way to slow inflation?

Growstuff this is no way to govern.

ronib

I don’t want to hog the debate but how is forcing people into poverty ‘deflationary’?

Because they'll hardly have any money to spend, so retailers will be forced to bring down prices if they want to sell anything (that appears to be the government's theory anyway).

But what do we know is causing inflation?

First the cost of energy

Second the cost of raw materials, imported goods and food.

What is not causing inflation is the rise in salaries and spare money in the system. People, particularly those with families are struggling to pay their bills so what is the logic of taking even more money out of the system?

What needs to be addressed is the supply crises. The government could and should have capped the price of fuel at a much lower rise taking the inflation headline down immediately, and indeed energy costs are beginning to fall, but the biggest issue is the supply crises in imports, raw materials etc. and this is still a real underlying issue and showing no sign of falling.

I don’t want to hog the debate but how is forcing people into poverty ‘deflationary’?

The only way I can see it being deflationary is if businesses go bankrupt and people lose their jobs (and homes), forcing them to live hand to mouth.

MaizieD so hardly likely to be deflationary as a political gesture?

However there are more people without a mortgage than with

Don't forget, ronib that there are also many people renting and many rents have risen with interest rates, too.

Also, businesses with loans, on which they have to pay more interest, are likely to raise their prices, too, in order to cover their costs.

What are various current mortgage interest rates? Projections?

Projected savings interest rates?

M0nica

What is the alternative?

What is the alternative to what, MOnica?

You're an economist. You surely must know that there is more than one cause of inflation and that supply side inflation can't be controlled by putting up interest rates?

Better to cut them rather than continue to make people poorer for no gain.

This strikes me as being unfair and ineffective. For a start the government’s claim is that 5 percent will slow down inflation and I don’t follow the logic, such as it is. So this policy is damaging young people on the whole. It seems that the government wants to make it difficult for people to spend surplus money by taking away surplus money! So much for a growth strategy. However there are more people without a mortgage than with. Why target this group? I didn’t think that Rishi Sunak could be this bad to be fair.

What is the alternative?

Thee has been a lot of advice on tv about what to do if you can't pay meet your mortgage repayments. One is to extend the term of the mortgage. Another is to ask for a repayment holiday and a third is to switch to an interest only mortgage.

Depending upon where your friend lives she could rent a room. Tax relief is available for rents less than £7500 (time apportioned if the let period is less than one year. This relief is only available to someone renting a room in their own house.

This isn’t going to work anyway.

The bank is trying to slow demand in order to stop inflation, but it isn’t demand that is pushing up inflation - it is a supply crises, energy and goods.

The government has a number of tools in its box it could use, but it seems struck by severe inertia, and is sitting on the sidelines moaning about the BoE.

And to answer your question - no it isn’t fair or right

Worse is to come next year when the government scraps section 21. Landlords have been selling their properties at an alarming rate.