Interest rate rise

[oil barron]

No government has cut the nhs yet, inflation will make everything it buys dearer though so extra will be needed to stay the same.
Inflation means higher prices and higher wages so tax take increases at both ends and reduces debt in real terms I'm sure most governments will be happy with inflation at a reasonable level for a couple of years as long as it doesnt cause a recession reducing tax take too much, two years of 10% inflation will reduce the "real" national debt by roughly 12% lots of government borrowing will be fixed rates so higher levels wont have a big impact.
Those living on fixed pensions will be impacted the most

The inflation on energy will increase the tax take, but there is going to be a push for reducing the tax take on that to help the cost of living. The inflation on government wages, is a net negative. And it’s pretty much guaranteed there will be a recession now.
On the government fixing long term rates, well Rishi screwed that up and was issuing mostly short term bonds.

Sunak accused of wasting billions servicing debt - BBC News

The Treasury should have insured government debt against interest rate rises, a research institute says.

www.bbc.com

 

[robs1]

The inflation on energy will increase the tax take, but there is going to be a push for reducing the tax take on that to help the cost of living. The inflation on government wages, is a net negative. And it’s pretty much guaranteed there will be a recession now.
On the government fixing long term rates, well Rishi screwed that up and was issuing mostly short term bonds.

Sunak accused of wasting billions servicing debt - BBC News

The Treasury should have insured government debt against interest rate rises, a research institute says.

www.bbc.com

Inflation on everything increases tax take. The gov gets 130 billion in vat every year so 13 billion extra if we have a 10% increase. It paid 83 billion in interest in 2021

 

[oil barron]

Inflation on everything increases tax take. The gov gets 130 billion in vat every year so 13 billion extra if we have a 10% increase. It paid 83 billion in interest in 2021

Only if people keep buying the same amount of everything. Which they probably won’t in a recession.

what is the Interest payable going to be in 2024 when 25% of those 10year gilts have to be re-printed and the BoE is no longer buying.

 

[robs1]

Only if people keep buying the same amount of everything. Which they probably won’t in a recession.

what is the Interest payable going to be in 2024 when 25% of those 10year gilts have to be re-printed and the BoE is no longer buying.
View attachment 1044091

They will hope inflation will have slowed by then, long term interest rates are still low, as for people spending they seem to be addicted to it,

 

[le bon paysan]

Boris said he "wants to build a high wage economy"
1, how do you do this if you don't want to pay high wages?
2, does he mean the top 1% get richer and the rest can go poke?

 

[oil barron]

They will hope inflation will have slowed by then, long term interest rates are still low, as for people spending they seem to be addicted to it,

Inflation will have slowed by then, but that doesn’t mean the Gilt yield will have dropped. Don’t confuse the BoE base rate with the Gilt yield. It is driven purely by market forces which for the past 12 years has been QE. The BoE cannot start QE again, so they have no where to go. Government spending is going to have to drop. So it’s NHS or Benefits.

 

[robs1]

Inflation will have slowed by then, but that doesn’t mean the Gilt yield will have dropped. Don’t confuse the BoE base rate with the Gilt yield. It is driven purely by market forces which for the past 12 years has been QE. The BoE cannot start QE again, so they have no where to go. Government spending is going to have to drop. So it’s NHS or Benefits.

Gilt yields have to be competitive with other rates.
Government spending never drops, sometimes it rises slower.

 

[oil barron]

Gilt yields have to be competitive with other rates.
Government spending never drops, sometimes it rises slower.

That is true, but it is going to have to drop as a % of GDP even if the total figure still slowly rises with inflation.

I agree on the competition setting the Gilt rate, which is why it is going to continue to rise as the main buyer is no longer in play.

 

[wanton dwarf]

It will be interesting to see how we end this vicious cycle. The government have the most to lose from higher interest rates as they are more heavily geared than joe public. They are therefore going to have to dramatically reduce government spending at the same time as everyone who gets paid by the government is striking demanding more wages and we are funding a proxy war in the east. What are they going to cut? Probably the NHS.

All interest payments at base rates - which goes to the B of England - ends up in the Treasury. Government debt interest doesn't exist except in foreign Bonds - in which case you are giving a foriegn power money.

 

[wanton dwarf]

Boris said he "wants to build a high wage economy"
1, how do you do this if you don't want to pay high wages?
2, does he mean the top 1% get richer and the rest can go poke?

Yes.

"Global Britain", importing "Talent" and having a high wage economy to afford "Climate Change" costs. But at the first hurdle of increasing wages we get ... no you cannot increase your wage.

Thing is the costs of "Climate Change" is going to increase. 10% inflation for 6+ years is going to double costs.

HMG have lost the plot, they don't want or know how to run an economy.

 

[oil barron]

All interest payments at base rates - which goes to the B of England - ends up in the Treasury. Government debt interest doesn't exist except in foreign Bonds - in which case you are giving a foriegn power money.

The BoE balance sheet and the Treasury are separate. It is needed to keep confidence in the currency.

 

[stewart]

They will hope inflation will have slowed by then, long term interest rates are still low, as for people spending they seem to be addicted to it,

People spending is what drives an economy, once they stop the economy stops, I keep doing my best to keep the economy going.

 

[oil barron]

People spending is what drives an economy, once they stop the economy stops, I keep doing my best to keep the economy going.

The economy isn’t the total value, it’s the movement.

 

[wanton dwarf]

The BoE balance sheet and the Treasury are separate. It is needed to keep confidence in the currency.

 

[oil barron]

View attachment 1044298

Ok, this is a little complex. The interest that is being paid to the Bank of England is by other Banks who are using them to hold deposits, it is not the interest payable on the Gilts that the BoE buys from the Treasury. When the BoE buys Gilts it has to show on their balance sheet.

 

[Martin Holden]

Boris said he "wants to build a high wage economy"
1, how do you do this if you don't want to pay high wages?
2, does he mean the top 1% get richer and the rest can go poke?

Like all politicians they talk gobbledy gook agt election time. Its a bit like the unions blaming the government for inflation. Seems folk have forgotten about the pandemic that cost billons and the Ukraine crisis that has badly damaged the world economy outlook. Even Rolls Royce workers have decided not accept a £2k lump sum pay increase this Autumn??!!!. High wage inflation isn't going to help anyone but executives need to be very careful about dividends and bonuses - if the "engine room" has to sweat a bit, so must they!

 

[le bon paysan]

Like all politicians they talk gobbledy gook agt election time. Its a bit like the unions blaming the government for inflation. Seems folk have forgotten about the pandemic that cost billons and the Ukraine crisis that has badly damaged the world economy outlook. Even Rolls Royce workers have decided not accept a £2k lump sum pay increase this Autumn??!!!. High wage inflation isn't going to help anyone but executives need to be very careful about dividends and bonuses - if the "engine room" has to sweat a bit, so must they!

Apparently it’s completely fine to remove the pay cap for City bankers because the City “needs all the help it can get after Brexit”. As public sector workers watch inflation wipe out pay rises… has there been a more glaring admission of how entirely f**ked Brexit Britain is?

 

[warksfarmer]

Fixed a loan early April at 3.76% total.

Today same loan 5.1%.

The bank told me they suspect ‘base rate’ will be 2.5% by December rising to 3% next year so total lending price is getting scary.

 

[midlandslad]

The first rate was very well timed.

Borrowing is becoming expensive and is only going one way at the moment.

Will this impact supply of land to the market and prices?

 

[bobk]

3% will fuk the housing market , every cloud ..........