Are UK inflation figures beginning to soar out of control?

Read More About Finance

December saw inflation rates in the UK leap by an entire percentage point, up from 1.9% in November to 2.9% in December. At the end of the month of December the UK government changed the VAT rate from the interim reduced level of 15% back to the previous 17.5% rate. A small rise in expenditure on the face of it, but over all, taking all VAT chargeable items into account, that move along with the claims that various key retailers silently increased prices by more than the official increase in VAT means that it is almost assured that prices have gone up further still in January.

So what level will that leave the January inflation figures showing? No doubt, at least 3.0%, possibly well over 3.0%.

Does this mean that UK inflation figures are racing away out of control and what does it signify for the regular citizen? Well, various big lending banks are having to put up their standard variable rate mortgage rates. Why is this the case if interest rates are level and their lowest on record? The answer is reasonably plain. The banks must appeal to lots of new savers and in a large number of cases they can only attract them by offering decent savings interest rates. Savers prudently investing in accounts paying 0.5% are losing a small fortune when the inflation figure is charging towards the 3.0% mark. In real terms, they are actually losing 2.5% of their hard generated investment by keeping their cash sheltered away in the bank.

For that reason, these wary savers are having to look around warily and with promising government backed savings and newly rescued banks being able to afford to pay out higher interest rates, other banks must raise the cash to follow suit. And there is only one straight forward way of doing this - raising the basic interest rates that they are charging their borrowers who have been the beneficiaries of unprecedented low rates for a long time.

This sudden and startling rise in the standard variable rates along with the pound's gradually promising recovery on the crucial international money markets could just be the prompt that the controlling Bank of England's monetary policy committee may see as the grounds to start to raise the base rate bit by bit after months of stagnation. They may want to manage spending whilst having to shield the wealth of savers from losing out on their valuable investments. Their only tool for controlling this would be to rise the base rate little by little.

Certain observers think that the estimated base rate raise must come at some point in the future and that if it is sooner rather than later, it could decrease the ultimate sting of the interest rises. They fear that if the interest rates are not raised in the near future, then they might have to raise a lot more in later months. Only time will tell.

Article Source: http://depositarticles.com/

Keith works for for CompareMortgageRates.co.uk where you can find loads of articles about how to compare best rates.

Please Rate this Article

Not yet Rated

Click the XML Icon Above to Receive Finance Articles Via RSS!

Additional Articles From - Home | Finance

Our other websites
All about SEO
Beauty Tips Forum

	Print This Article
	Post Comment
	Add To Favorites
	Email to Friends
	Ezine Ready

Submit Articles
Member Login
Link Us
Submission Guidelines
Ezine Notifications
Article RSS Feeds
Sitemap

New Stuff
About Us
Developer
Good shopping portal
Link to Us
Contact Us
Privacy Policy
Terms of Service