The Chancellor’s Budget presupposes that the interest rates on the amounts she will need to borrow to maintain current Government spending will stay as they are or go down. That can only be the case if inflation stays around 2%, but is that likely?
Issue 13 of INTEREST, from Moneyfacts, explores the path of inflation as the Government expects employers to absorb a rise in National Insurance, whereby costs could be passed onto customers or staff.
The argument over who will ultimately end up paying for the Chancellor’s increase in Employers’ National Insurance is interesting. Whilst some employers may try to absorb it, most won’t be able to afford to do so. If employers had surplus money like this, most would have already used it on sorting out the deficits on their Pension Schemes caused by low interest rates, or repaying their COVID borrowings or the current wage and energy price increases. If they could they would invest in their businesses which will then grow for the benefit of everyone whilst at the same time generating tax revenue on increased sales and salaries.
As it is, the amounts we are talking about here are just too large for most firms to absorb and the cost will have to be passed directly, or indirectly, onto the ultimate user or the customer or staff and the result of this will, very simply, be redundancies, cost cutting and inflation. (Read more on Pages 5 & 6)
The latest issue of INTEREST also marks 18 months since the first edition and, amongst other things, explores the fluctuation of inflation and interest rates (Page 4). While the impact of holding Bank base rate at an elevated (but by no means high) level over the past year and a half has been more positive for savers, even now savings rates remain lower than they should be. Having sat between 4.75% and 5.25% over the past 18 months, Bank base rate has also gone some way (but perhaps not far enough) in bringing headline inflation back to a more desirable level. Despite this, persistent inflationary pressures remain and threaten to cause another spike. It is more evident than ever that more consideration must be given to savers, and other areas of the economy, when assessing the impact of changes to Bank base rate.
To quote the first edition of INTEREST: “Whatever their remit, the MPC’s decisions need to be made after consideration of all the major factors that reflect the strength of the economy, not just inflation.”
Read more in the latest issue of the INTEREST journal, which you can read for free here.
- ENDS
INTEREST is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
Next Issue 7 March 2025. To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk
The Chancellor’s Budget presupposes that the interest rates on the amounts she will need to borrow to maintain current Government spending will stay as they are or go down. That can only be the case if inflation stays around 2%, but is that likely?
Issue 13 of INTEREST, from Moneyfacts, explores the path of inflation as the Government expects employers to absorb a rise in National Insurance, whereby costs could be passed onto customers or staff.
The argument over who will ultimately end up paying for the Chancellor’s increase in Employers’ National Insurance is interesting. Whilst some employers may try to absorb it, most won’t be able to afford to do so. If employers had surplus money like this, most would have already used it on sorting out the deficits on their Pension Schemes caused by low interest rates, or repaying their COVID borrowings or the current wage and energy price increases. If they could they would invest in their businesses which will then grow for the benefit of everyone whilst at the same time generating tax revenue on increased sales and salaries.
As it is, the amounts we are talking about here are just too large for most firms to absorb and the cost will have to be passed directly, or indirectly, onto the ultimate user or the customer or staff and the result of this will, very simply, be redundancies, cost cutting and inflation. (Read more on Pages 5 & 6)
The latest issue of INTEREST also marks 18 months since the first edition and, amongst other things, explores the fluctuation of inflation and interest rates (Page 4). While the impact of holding Bank base rate at an elevated (but by no means high) level over the past year and a half has been more positive for savers, even now savings rates remain lower than they should be. Having sat between 4.75% and 5.25% over the past 18 months, Bank base rate has also gone some way (but perhaps not far enough) in bringing headline inflation back to a more desirable level. Despite this, persistent inflationary pressures remain and threaten to cause another spike. It is more evident than ever that more consideration must be given to savers, and other areas of the economy, when assessing the impact of changes to Bank base rate.
To quote the first edition of INTEREST: “Whatever their remit, the MPC’s decisions need to be made after consideration of all the major factors that reflect the strength of the economy, not just inflation.”
Read more in the latest issue of the INTEREST journal, which you can read for free here.
- ENDS
INTEREST is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
Next Issue 7 March 2025. To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk
