It will never not infuriate me, we had a decade of low interest rates, as you have shown on that graph bizarrely low. Yet instead of the government investing the country by taking out low interest loans they did nothing and look at the country now, falling apart, when it could have been prospering.
All the money was invested in ever increasing house prices. Check out how many times Vince Cable gave warning like "booming house prices are destabilising the economy and any sane person should worry about what is going to happen when interest rates rise as the economy returns to normal."
Me too. I mention this to many people I know and most have never even thought about it before. The tories did austerity whilst there was historically unique (and anomalous) low interest rates. Makes me so Fing mad tbh
But did really long term interest rates fall as low as short term ones did? Borowing has to be refinanced all the time and if there is a great deal of borrowing at a time of rising interest rates it becomes very expecting. If the government had spent the sums that had to be spent on covid beforehand it would have been a Lizzie O'Leary budget situation when they began splashing out on covid.
@@auldfouter8661 This isn't a mortgage, it would be a straight-line amortization i.e. the same amount payed back each month until the loan is over. Not to mention most would be short 5 year and 10 year loans, some even quicker than that, as the investment would be got back very quickly I.e. house building. Meaning if for some random bizarre reason they refinanced at 10% they'd have from 0 to what a few years left on the loan and the economy would be booming making it much less of a big deal if they did the thing they wouldn't do.
Great video Damien. So annoying that inflation is used as a political football, while the politicians and BoE are so unaware of how bad it really is for most people. Extremely frustrating to see politicians claim all the "good work" for themselves when they're well aware that they have done nothing to alleviate the suffering of so many people (and children) who, more and more every day, are slipping into poverty. Keep up the good work spreading the real news and information that people need to be hearing!
They've put the minimum wage up by 28% since mid 2021 and then they've cut NI rates for working people. Some of the minimum wage rise has to be influencing the service secor inflation rate.
Excellent as always. I keep telling people to not believe the headline number, and that when you actually look at the data for a few minutes, things aren’t really getting that much better.
Probably, but they have every right after decades of wage stagnation. The issue is that businesses who have enjoyed the benefits of grossly skewed profit vs Labour costs aren’t willing to take the hit they should from increased labour costs so they just pass the cost on to the consumer. Despite 40+ years of trickle down economics favouring profit over wages
If inflation is too high. The people in charge have two ways to deal with it. Work hard and deal with it. Second option, fiddle the figures. Same goes for education standards and every other measure or statistic we see.
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I've heard that the Town and Country Planning Act is to blame for house prices, as the majority of planned building gets rejected unless a large number of conflicting parties approve. Now a huge amount of people are competing to pay an extortionate amount of money for crumbling houses built in the 1960s.
A major problem is not including the most expensive thing most people ever buy (a house) in the inflation figures, To me CPI-H is counterintuitive. If a landlord is seeing his houses soar in value then he isn't going to be worried about raising rents. As for Landlords, in 1999 (when I sold a house) I had honestly never heard of a Buy To Let mortgage. The idea of having two mortgages was unheard of except for very high interest "bridging loans".
Glad you decided to keep going with regular inflation videos Damien. I know they can be a bit boring for you, but it feels like such an important part of our monetary system to keep tabs on and has a huge influence on our normal lives. GJ
Could the service based inflation be partially due to people spending beyond their means? Whilst some will appreciate the situation and ‘tighten their belt’ others seem unwilling to kerb spending instead wish to maintain a certain lifestyle even if that means using credit to do so
Thank you, Damien. This is really interesting. It's crucial to peel back the sensational headlines to find out the actual truth. The 2% inflation figure is actually rubbish and I now only know that because of you. So, thank you.
Yup. Even if inflation stays the same month to month, the historical average will go up because, historical averages. Also, services are more weighted to white collar salaries, and they will go up if the economy starts to grow, especially because they have been negative for a couple of years. Goods are weighted more to wages abroad and blue collar, and they won't go up as much.
It's clearly the high interest rates that are keeping service costs and housing costs high and thus inflation .. surely dropping the rates to a more sensible 3-4% would sort the housing costs raising and service based inflation ?? Services are high because their costs have gone up because of higher rates .. it's bananas !
If they included a decent portion of House Price in the inflation figures they would have an excuse to drop rates now; but hopefully no excuse for not raising them when people's houses were earning them more than their day jobs.
Also been hearing companies getting their Christmas Orders in now due to the Suez and Panama Canals being disrupted. Shipping rates have gone up latelym
You're sort of correct, however the ONS produce a monthly index for CPI (search ONS D7G7). This is used to calculate the annual rate of UK CPI inflation. I prefer the older RPIX measure (search ONS CDKQ), as it reflects what most people actually experience. It averages about 0.9% higher than the CPI rate taken over time. Regards, JohnnyK.
This 2% arrived on the headlines in the same week I noticed a lot of the food I buy has jumped 10% again (for the second time this year). Butter's come down from £2 to £1.60 (if on offer) is an exception.
I'll be the one to say it. Headline inflation is going to fall below 2% gonna have a little panic of recession and deflation causing the rates to drop and causing more inflation in 2025/2026
Great information as always Damien, telling the real story of what's going on. Your scripts are always absolute genius though, it's like watching eminem do stand up.
You haven’t mentioned the boarder checks delayed 5 times by the tories , these price rises won’t really hit until oct/ nov, inflating will be affected,
Are mortgage interest rates in a unique position with the current state of the housing market? If current house prices were to stay or increase, a more consistent 5+% interest rate would stop a lot of people being able to get into a home.
There's something not right about how we measure inflation. I remember in 1987 a can of coke was 19p, according to official inflation calculators it should now be 53/54p - good luck finding it at that price anywhere.
Housing hasn't changed, the population has! What you are seeing with service inflation is too many people chasing too few services. Official net migration is running at 500,000 a year, the reality is higher.
Services inflation is still sticky and will barely budge, it's currently at 5.7% which isn't surprising since we're a service based economy. Until this falls a bit more than just the incremental 0.1-0.3% changes, inflation will either stay at 2% (best case scenario) or rise again (worst case scenario, most likely imo).
Highly informative and balanced but would add that another major issue that is driving core inflation is wage inflation. The projected average wage rise for this year is 6%, which firms have to cover by raising prices and fuelling services inflation. Bit of a vicious circle, problem is the fiscal drag of frozen Income Tax Bands is devaluing the raises that folks are getting. A simple answer would be to raise tax thresholds, but that’s not going to address the current level of national debt of circa 96% of GDP, roughly £2.6Tn, approx £37k per person in the UK, which is a result of the debts the country accrued during COVID with furlough pavements, company loans, PPE, a vaccination program, nightingale hospitals, etc. Whilst most parties have state they will not raise Income Tax or NI, none have committed to unfreeze the tax bands early, and most have identified other taxation avenues or ‘clamping down schemes’ to fund the initiatives in their manifestos. It obvious, whoever wins the election, that fiscal drag (and its knock on issues) are with us till Apr 2028 with the likelihood of more diverse taxes to fund political ambitions.
People in the uk are still a bit deluded. I speak to home owners who expect the rates to go back down near where they used to be. The last decade has been an anomaly, it's never going back and instead returning to the norm.
Surely people are asking for more money for their services to pay for higher cost of goods and housing? So in a sense, services inflation will generally lag behind goods inflation, and is also going to be increased by interest rates. Therefore the only sensible decision is to lower interest rates. Sounds like this is the main point (I'm halfway through the video), but infuriating nonetheless.
They have not reduced interest rates as expected as service inflation is still high. Though go to USA and see real inflation. Gone form costing the same as the U.K. to double.
When will the energy price cap (dropping July) show up on the inflation figures? Is it August? Prices pretty much baked in to rise for October already, so the figures will drop then swiftly rise again... I remember you calling out the previous lies it had fallen, due to ignoring the price guarantee credits
Out of interest - how are you doing v your new years goal to do X (I can’t remember the number) videos this year? Oh and I last bought a door knob in 2019.
