The Bank of England today increased the UK Rate of Interest from 5% to 5.25%
This is apparently aimed at fending off inflation which the BOE measures by way of CPI. Ostensibly, CPI tracks inflation by measuring the consumer’s ‘buying power’ against a specified basket of items. However, as someone put it earlier; “That’s great if you’re buying a new TV every month”. In real life, CPI seems to have little bearing on inflation in terms of the ability to pay bills.
The BBC had a bit of a moment about it too. The had been running the story since the previous day that a ’stay’ at 5.25% was a done deal.
Interest rates set to stay at 5%
This story was still running on the BBC news ticker as the MPC read out their statement that interest rates were to rise this month to 5.25% The BBC were apparently surprised by this.
Shock as UK rates rise to 5.25%
Me? Oh, I’m not really shocked or surprised. I’m one of those low-paid people who feel the pinch of high inflation first. I suspect UK inflation is far higher than the 2.7% quoted by the BOE using it’s CPI figures.
I will await with interest the BOE statement on the current rate of inflation next Tuesday. I wouldn’t be surprised though if they ‘engineer’ the figure to be 2.9% (or 2.9999999%) to avoid the 3% cutoff where they have to write an open letter to Gordon Brown explaining why the economy is borked.
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