Bank of England Interest Rate Decision May 2024 - My Take

The Bank of England is battling core inflation of 4.2% and faces an economy with next to zero growth over the next few years. UK investors are focused on the policy response of the Bank’s Monetary Policy Committee as it keeps the cost of borrowing high to cool but hopefully not crash the UK economy and get inflation back under control. Hear our summary of what the MPC says and does and what it means for investors and homeowners in the UK.
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[@ChristineMeier963]

When you work on something that only has the capacity to make you 5 dollars, it does not matter how much harder you work - the most you will make is 5 dollars.

[@DowntownR]

Unemployment rate is fudged. There are millions not working and not claiming benefits.

[@Jalleur14325]

Aren't there more than a million illegals living here?

[@melanieah5501]

So we are still no closer to healing the cost of living crisis. And if any wars escalate, the interest rates will go up more?

[@peterb2538]

Is monetary policy working with, or against fiscal policy currently, and if not, what is the (likely?!) change in government likely to do to the relationship? PS love the channel, Ramin, awesome 👍

[@barkingdadprofessionaldogw2371]

Love your content. Thank you 🙏🏼

[@Pensioncraft]

You are so welcome @barkingdadprofessionaldogw2371

[@antonvinnichenko8372]

Thanks Ramin, I really appreciate the good "boring" content. Keep it up please!

[@Pensioncraft]

Glad you enjoy it @antonvinnichenko8372

[@festerarl6653]

How to get higher rates of pay ? Difficult question to answer correctly with confidence. Clearly the 'output' by the worker has to be highly sort after so I'd argue high tech / specialist manufacturing is one area where the UK scores well. Banking / finance ? - yes, but..... I feel there is an undercurrent of change characterized by the lack of IPO's hitting the LSE, with some of the expected launches going to the US and Europe instead. It'll be a slow moving phenomena I feel. Bankers bonuses are a real source of anger because the bankers crashed the economy a while ago - from which we are still all feeling the effects - and yet still got nice fat pay cheques. It's simply immoral and unfortunately this government and the next one seem fit to remove the cap / keep it removed. Unfortunately I feel these bonuses are at heart of a lot of the problems for the general public - particularly in the south east with house price inflation etc. But coming back to the original question - these bankers are clearly in an industry that is 'valued' hence the high pay. If you want to make money go into a job handling money.

[@ElyRiverBlues]

Excellent analysis!

[@Pensioncraft]

Thank you @ElyRiverBlues

[@dapper4797]

Thanks Ramin, I find your content extremely helpful, much appreciated! Please accept this small gesture of thanks (the fact that it equates to a bag of treats for a very deserving canine friend is no coincidence ;)

[@Pensioncraft]

Thank you @dapper4797 that's very kind of you 🐶

[@log874]

I suspect UK inflation will follow US inflation along a new upward trend in the coming months, and we might get some ugly inflation numbers in Q4 once falling energy prices in 2023 cease to flatter headline figures. But let's say that doesn't happen and inflation continues at 3-4% with rates at just over 5% and unemployment figures remain relatively low....well, what's the problem with that!? That's about right, isn't it? That's the much hoped for 'soft landing'. Why do we need zero rates? No need to cut, or even consider cuts yet.

[@apeacock233]

The problem with that is that not everyone is earning, and many who are employed aren't getting pay increases .

[@banksfit5302]

Asset carrying, money positive skilled workers will love that scenario, but the average person will take it rough 😂. Average wages are behind inflation. Stagflation scenario in real terms is what that would be & the people who own the place won't stomach less growth in profits etc so the bulky working class will shoulder the pain. Just my 2p

[@Jalleur14325]

The ecb is planning to cut rates!

[@brightername8801]

Hey

[@sassasins031]

So, don't tax ISAs (unearned income) and raise the minimum wage (inflation) then wonder why young people are struggling? You can't make it up.

[@dsmith657]

There is no impirical evidence that increasing interest rates reduce inflation. See for example Blair Fix statistical assessment. Quite the opposite infact - rising inflation is strongly correlated with rising interest rates. So BoE models are not worth the electrons used to run them. Why because they believe in the neoclassical world of fantasy economics. See Debunking Economics by Steve Keen. So expect higher for longer interest rates.

[@tancreddehauteville764]

I see no reason why the BoE should reduce interest rates until 2025. Combating inflation is more important than providing cheap mortgages.

[@melanieah5501]

You don't, thousands would.

[@log874]

'Cheap' mortgages are a false economy. If mortgage rates fall, property prices rise and you are no better off. And eventually inflation rears its head and rates rise a lot and you go insolvent. Anyone who thinks low rates and QE are good for the poor just doesn't really understand money. These tools of financial repression are designed to transfer money from the poor to the rich. That we abandoned hard money in the 70s, and that working people haven't got any better off in real terms since the 70s, is no coincidence.

[@guyteigh3375]

Says a selfish person that also fails to understand how the economy works, how important it is to avoid deflation, recession and depression.

[@log874]

@guyteigh3375 Incorrect. It is not important to avoid recessions. Small recessions every 4-5 years are necessary and much less harmful than depressions, which are caused largely by repeated efforts to avoid mild recessions (e.g. actions during post tech wreck recession caused sub prime bubble followed by 2008 depression) not by raising interest rates! Mild deflation also doesn't matter. Deflation fears stem from one data point - the great depression. But it is fairly easy to get our hands on about 250 years of inflation data. Indeed if you look hard enough you can get inflation data going all the way back to the turn of the 14th century. And what the data shows is that periods of high inflation were almost always followed by periods of deep Deflation.....and it didn't cause depressions! Even throughout the industrial revolution there were periods of deflation. Over that time, average annual inflation was basically zero, putting paid to the idea we need 2% or whatever. Even in the great depression, it wasn't deflation that caused the depression, it was the depression that caused deflation. Look, as someone who is fairly asset rich, they can cut interest rates as far as I'm concerned. But all that will do is cause the have nots to borrow from their future selves to pay me for goods and services today. That won't be good for them.

[@DowntownR]

The solution to inequality is wealth tax. Uncomfortable but true.

[@theguy9067]

Reduce government spending/ aka money printing

[@tancreddehauteville764]

Already in place, it's called council tax.

[@theguy9067]

@@tancreddehauteville764 inheritance tax, corporation tax, capital gains tax, windfall tax

[@mellowmarkable]

​@@tancreddehauteville764 How is council tax a wealth tax? Council tax has become increasingly regressive with regard to property values - the cheaper your property, the more you are likely to pay as a proportion of your property value. So it's more like the opposite of a wealth tax.

[@apeacock233]

You mean make everyone poor?

[@muratdagdelen8163]

Should increase to at least 6%

[@sassasins031]

Who believes an "inflation forecast"? Ridiculous.

[@oliverburns1984]

Higher for much longer , get used to 6-7% mortgages

[@DowntownR]

Inflation is going up. Look at leading indicators and next weeks us cpi for the truth

[@Jalleur14325]

The reality is that to properly deal with inflation there will need to be an end to the money printing and further hikes.

[@Craig121000]

Yes, other people are being hammered by inflation.