Off Topic Interest Rates Rise - Why?

[bcfcredandwhite]

Please could someone familiar with economics explain why, at a time of hyper inflation, interest rates have to rise?
I've had this discussion with MANY people and NOBODY has been able to explain clearly why making people pay more for their mortgages - at a time when it's getting difficult to pay for heating their houses in winter, or put food on the table - is good for the country??
Hitting households who are already reeling from massive price increases just seems to be adding fuel to the furnace of misery we are all already in(??)
Making people's mortgages rise is ADDING to inflation, not reducing it... isn't it?

 

[realred1952]

BCRW not a simple answer to this one as many factors involved
but
... prices stay low at times when inflation low ... also prices stay low when crops and supply are plentiful ... inflation stays low when people are happy with their wages ... low inflation = low prices = no need for massive wage rises ... UTOPIA .. LONG MAY IT REIGN ......... interest rates are a result of low inflation / high inflation when all is balanced no need for High interest payments "to buy" things interest is in 2 parts .... save or spend! .
SO UTOPIA!! ... next bits are harder to explain ............ are with it so far! ?

 

[RedorDead]

Please could someone familiar with economics explain why, at a time of hyper inflation, interest rates have to rise?
I've had this discussion with MANY people and NOBODY has been able to explain clearly why making people pay more for their mortgages - at a time when it's getting difficult to pay for heating their houses in winter, or put food on the table - is good for the country??
Hitting households who are already reeling from massive price increases just seems to be adding fuel to the furnace of misery we are all already in(??)
Making people's mortgages rise is ADDING to inflation, not reducing it... isn't it?

Higher rates makes it more expensive for people to borrow money, encourages people to save and, overall, mean that people will tend to spend less.
If people spend less on goods and services overall, then the prices of those things tend to rise more slowly. Slower price rises mean a lower rate of inflation.

 

[bcfcredandwhite]

Higher rates makes it more expensive for people to borrow money, encourages people to save and, overall, mean that people will tend to spend less.
If people spend less on goods and services overall, then the prices of those things tend to rise more slowly. Slower price rises mean a lower rate of inflation.

I get that when the economy ‘overheats’ ROD - when people are overspending.
However, this crash is different - it wasn’t caused by a ‘boom and bust’ - consumers didn’t cause this one by buying too many TVs or other consumer luxuries - so punishing them - existing mortgage owners in particular (who bought a product they budgeted for) seems misguided and won’t fix things. It’ll just cause debt and misery.

 

[RedorDead]

I get that when the economy ‘overheats’ ROD - when people are overspending.
However, this crash is different - it wasn’t caused by a ‘boom and bust’ - consumers didn’t cause this one by buying too many TVs or other consumer luxuries - so punishing them - existing mortgage owners in particular (who bought a product they budgeted for) seems misguided and won’t fix things. It’ll just cause debt and misery.

The Bank of England know what they are doing. It’s the rest of them at the top that seems ****ed.

 

[realred1952]

Higher rates makes it more expensive for people to borrow money, encourages people to save and, overall, mean that people will tend to spend less.

sorry flawed argument ROD ...
if people spend less then supply suffers, when supply gets wasted or cut then supplier has profit so adopts a policy of less is more ... PUTRID JUST DONE IT AGAIN.... [along with OPEC ] cut 2million barrels a day from 46 million .. price per barrel costs more .. infact there is a net gain not proportionate to cut .....

interest rates are the balance, and a balancing act ........ agree 5% savings rate would be fine save a bit of money and get some reward! however any interest on savings would mean a inrease to maybe 7 or 8% on mortgage, credit card rates would increase, loans to buy now pay later increase so net gain would be a loss for most.
Take it further companies [most] have bank loans/ bridging loans to buy stock or pay employee's until product is sold .. as I said to BCRW it is not a simple explanation!!

 

[bcfcredandwhite]

This article illustrates my point.
https://news.sky.com/story/why-is-the-uks-rental-market-in-chaos-12711971

According to this, approximately 2/3 of households will feel pain - either directly or indirectly from the mortgage rates increases.
I don’t get how that will help bring the energy prices down.

 

[realred1952]

According to this, approximately 2/3 of households will feel pain - either directly or indirectly from the mortgage rates increases.
I don’t get how that will help bring the energy prices down.

You need to not look at singular things you asked can anyone explain .. it is not a 1 or 2 sentence thing it encompasses a wide spectrum of inter linking items all as a result of or adding to runnng in paralell with .. basically all major experts agree the rot set in on 24th Feb ....
so start from there!

 

[Red Robin]

And they have crucified good business by increasing corporation tax from 19% to 25% unbelievable.
Perhaps they should stop spending millions and millions on gimigrants and giving them flash hotels-money-phones that many Brits can only dream off.

 

[raver]

And they have crucified good business by increasing corporation tax from 19% to 25% unbelievable.
Perhaps they should stop spending millions and millions on gimigrants and given them flash hotels-money-phones that many Brits can only dream off.

Those businesses were helped massively during the pandemic with furlough, grants etc and many would have gone bust without the help. Time to pay a bit back towards it.

 

[Red Robin]

Those businesses were helped massively during the pandemic with furlough, grants etc and many would have gone bust without the help. Time to pay a bit back towards it.

Much money was scammed by so called business and will never be recovered.
Me I took three weeks furloughed pay for my staff when covid first kicked in and that was it-others just abused and scammed the system.

 

[raver]

Much money was scammed by so called business and will never be recovered.
Me I took three weeks furloughed pay for my staff when covid first kicked in and that was it-others just abused and scammed the system.

Agreed I know business that royally took the piss. I was in no way suggesting you did. Sunak did say at the time he was helping business out but was also coming for them

 

[raver]

Much money was scammed by so called business and will never be recovered.
Me I took three weeks furloughed pay for my staff when covid first kicked in and that was it-others just abused and scammed the system.

the business I worked for went from 400 Staff to 50 with the rest on furlough then had a record year for profit. The MD just bought a £10 m villa in Ibiza

 

[realred1952]

the business I worked for went from 400 Staff to 50 with the rest on furlough then had a record year for profit. The MD just bought a £10 m villa in Ibiza

not the only one ... neighbour "just away with it" was caught but got away with it ... maybe should say challenged ...

 

[wizered]

the business I worked for went from 400 Staff to 50 with the rest on furlough then had a record year for profit. The MD just bought a £10 m villa in Ibiza

Boris pockets £130k for speech in US – and receives a standing ovation afterwards
Ex-Prime Minister Boris Johnson has embarked on a new career after leaving Downing Street last month.
https://www.express.co.uk/news/world/1681912/boris-johnson-speech-us-insurance-conference-new-career
A bunch of Spivs, the whole system stinks..

 

[bcfcredandwhite]

Boris pockets £130k for speech in US – and receives a standing ovation afterwards
Ex-Prime Minister Boris Johnson has embarked on a new career after leaving Downing Street last month.
https://www.express.co.uk/news/world/1681912/boris-johnson-speech-us-insurance-conference-new-career
A bunch of Spivs, the whole system stinks..

I wonder if any of what he said his speech was actually TRUE??

 

[AshtonRed]

I wonder if any of what he said his speech was actually TRUE??

Unlikely, he doesn’t the meaning of the word.