Is raising interest rates the right move and will it slow inflation?

This is Money Podcast

This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 18 March 2022

⏱️ 38 minutes

🔗️ Recording | iTunes | RSS

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Summary

It's a hat trick. After all those years of waiting in vain for a rate rise after the financial crisis, now the Bank of England has the wind in its sails and has raised rates three times since December.

The shift up in the base rate to 0.75 per cent hardly takes rates into the stratosphere but moving from 0.1 per cent to here in four months stands at serious odds with the lower for longer mantra that dominated the past decade and a bit of central bank thinking.

It's being done to combat inflation that's now forecast to hit 8 per cent (or maybe higher admits the Bank). The irony is that interest rate rises will do little to tackle imported inflation.

So is the Bank making the right moves? Is it right to try to crack down on inflation now, or is it putting the Covid recovery at risk? And what does this mean for savers, borrowers and investors?

On this week's podcast, Tanya Jefferies, Georgie Frost and Simon Lambert discuss the rate hike - if you can call a quarter point rise a hike - and how much more of this may be coming down the line.

Plus, what are the best shares and funds to stash in your Isa in volatile times, do you have to pay tax on a £20,000 bitcoin profit, and would you swap your device trash for cash at Currys?

Transcript

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0:00.0	Welcome to This Is Money Podcast. I'm Georgie Frost and joining me and editor Simon Lambert today is Pensions and Investments editor Tanya Jeffries. And coming up like London buses and other such cliches, you wait forever for one and then three interest rate rises come along at once. Will it do anything to rising inflation and what does it mean for our money? Also today, it's ICEA season that time of the year
0:21.2	to stuff those tax-free little gems with as much of your 20 grand allowance as you can
0:25.7	before you lose it, but how and where to invest in these troubled times. Tanya has some ideas and
0:31.3	tips for us, plus tax on Bitcoin profit and Curries launches cash for trash, but make sure you
0:37.4	wipe those old devices
0:38.5	first. Don't forget to stay up to date with all the latest breaking money news, just go
0:42.2	to this ismoney.co.uk or download the app. But first, the Bank of England decided to raise
0:47.7	the base rate of interest for the third time on the bounce this week, this time by 25
0:52.8	basis points to 0.75%. Could we see 2% by the end of the year?
0:58.2	So was it the right move in the current circumstances with households already well and truly
1:02.6	under the cosh? Or should they've gone even higher perhaps to manage this runaway inflation?
1:08.5	Simon, did you see it coming? No. Well, I did because it was almost certain that it was
1:16.5	going to happen. But I must admit, whilst I am someone who has argued long, long, long, long years
1:26.2	that the Bank of England should be raising interest rates sooner than it has done.
1:30.9	I think that we left them on the floor for too long after the financial crisis.
1:35.1	I think we left them on the floor for too long after the Brexit vote.
1:38.1	I think we left them on the floor for too long after the COVID lockdowns.
1:41.4	I don't think that the 0.1% interest rate that we introduced
1:45.3	as the COVID first struck and the lockdown's first struck still needed to be there all that
1:51.7	time later right up until December last year. But I think I've got Stockholm syndrome. I think I've
2:00.0	fallen in love with my low interest rate loving captors.
2:04.9	And so I never expected that they would get from 0.1% to 0.75% between December last year and March this year.
	...

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