UK Inflation rate is at the highest level these days. This is the worst and highest level of inflation.
The consumer prices rose by 4.2% in the 12 months to October 2021, up from 3.1%in the 12 months to September. This is the highest 12-month inflation rate since November 2011.
Earliest this month, England bank held the interest rate steady. It didn’t pay attention to the capitalists’ expectations. Because of the pandemic, the England bank didn’t want to increase the bank interest.
Life expenditure increased in October. The inflation rate is at the highest level now compared to ten years ago.
What is the meaning of inflation?
Generally, inflation is a measure that shows how much the goods price increases. It is the most connected fact about consumers’ power of purchasing. This fact has a direct relationship to the people’s financial situation.
Actually, goods involve everything such as energy price, house loan, transportation, etc.
CPI is the best measure to assess the inflation rate. CPI shows you the prices of thins at this time with the cost of last year. The average increase in prices is known as the inflation rate.
Indeed, the latest inflation rate is 4.2%, but it was 3.1 per cent last year. This was a high jump that the government hadn’t anticipated this rate.
According to the CPI, this year, the price of goods increased 4.2%. This year everything has become expensive by 4.2%.
For example, a loaf of bread costs you £1, but this year the price of a loaf of bread is £1.04.
In September 2021, housing and household services increased from 0.69 percentage points in September 2021 to 1.23 percentage points in October. This is the highest rate as compared with November 2011.
Transportation has had the highest rate of inflation. The petrol price changed in October 2021. It increased from 113.2 pence per litre earlier to 138.6 pence per litre in October 2021.
The lockdown situation, fuel, and car price are the items that have had an extraordinary effect on transportation inflation.
Hotels and restaurants’ prices have even increased this year. As a result, the inflation of one good can significantly affect the price of lots of things.
What is the meaning of bank interest?
In fact, bank interest is the money that the bank pays to its customers. Interest is the monetary charge for the privilege of borrowing money; typically, it is an annual percentage rate(APR).
Interest is the amount of money a lender or financial institution receives for lending out money.
The rate of bank interest.
For instance, sometimes you borrow an amount of money from the bank, or you may save an amount of money in the bank.
In fact, you or the bank are in charge of paying a certain percentage. Each month the bank pays you a certain amount of money, or in the situation that you borrow some money or get a loan, you have to pay a certain percentage.
For example, if you have £1,000 in your account, the interest that the bank pays you each month is 0.5 per cent, your bank will pay you £5.
Or even in the situations that you get a loan, the bank determines an extraordinary amount of money that you must pay each month. The bank interests are not equal. This is the England bank that determines the percentage of interest rate.
The bank of England explains,” we certainly use Bank rate in our dealings with other financial institutions, which influence lots of different interest rates in the economy.
This includes the various lending and savings rates offered by high street banks and building societies.
“for example, in 2020, the Bank rate was cut to 0.1 per cent during the Covid-19. This reduced the rates at which high street banks could borrow money from the Bank of England, which in turn meant they could lend to their customers at lower rates.
Banks lowered the interest rates on some loans, such as mortgages, and offered lower interest rates on some saving accounts.
The importance of interest rate
By all means, the wages and the inflation percentage must have an equal conversion. If there isn’t any balance between these two matters, people will become poor.
Consequently, if people get poor, they must decrease their purchases. They must consume less. They must buy cheaper goods. They must eliminate some goods from their regular consumption.
In 1950 the price of a new house was £1,891, around 65,224 in today’s money, and the average salary was £10 a week, roughly £339, according to calculations by Sun life.
Bank interest rate
Indeed, the inflation rate is increasing every day. Unemployment is growing too. England bank is trying to stabilize the inflation rate in the future.
England bank has increased the interest rate. In fact, the interest rate increment is 0.25.
Statistically, these days’ omicron is worrying the government, and with the existence of this problem, the inflation rate is another problem that has caused the government anxiety.
England bank increased the interest rate from 0.1% to 0.25%. The bank declared that the life expenditure would annoy people and be dangerous.
Concerning the high inflation rate in the recent 10 years, the bank warned that the energy rate is increasing in the winter. It is predicted that the energy rate will increase from 5.1% to 6%.
This decision is very shocking. Omicron’s dangerousness and the economic pressures are very hard to tolerate for people.
Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said:
“The MPC’s decision to hike bank rates today, before it knows the full extent of the economic damage wrought by the surging Omicron variant, underlines how worried it is about it is about the inflation outlook.”
On Thursday pound increased. It increased by about 1.33 cents against the dollar. The US Federal Reserve said that it anticipated raising rates three times in 2022.
Significantly the interest rate rise before Christmas and Omicron spreading speed is surprising in England.
Paul Hollingsworth, the chief European economist at BNP Paribas Markets 360, says:
- The BoE’s decision to hike rates affirms our view that, on balance, the economic data would hold the upper hand.
- While the overall message was more hawkish than expected, we stick to our view that the next rate hike will not come until May, not least because of the MPC’s sensitivity to Omicron-related developments.
- Beyond that, we continue to expect the MPC to hike at a slower pace, but ultimately by more than is currently priced into markets.
Statistics show that most banks of the world’s interest rates are rising. It can be so dangerous and surprising. The inflation rate _raising is making life harder for people.
Erik Norland, the senior economist at CME Group, says central bankers are starting to diverge, which could lead to volatility:
“the BofE’s decision to raise rates reinforces how monetary policy is beginning to diverge globally. This divergence has the potential to create volatility in currency markets next year.
England bank reaction against inflation
Is there any relationship between inflation and bank interest raising? Is there any probability of inflation rising?
Sometimes bank interest rates may affect the inflation rate. So these two facts have a close relationship with each other.
This is the England bank that determines the rate of bank interest; whenever the England bank increases the interest rate, it should increase the employer’s and workers’ salary and wages.
If the England bank doesn’t think about this possibility, not only doesn’t it have a good effect on society, but people’s economic situation will be very hard, and they will become poor.
