Was the Bank of England right to raise interest rates?

This is Money Podcast

This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 17 December 2021

⏱️ 42 minutes

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Summary

They finally did it! The Bank of England's Monetary Policy Committee raised the base rate from its emergency 0.1% level to 0.25%.

That came the day after inflation rocketed to 5.1 per cent - and is forecast to keep rising - and in the week that the International Monetary Fund warned the Bank of England against 'inaction bias'.

Markets were cheered by the rate rise and economists were broadly welcoming too, yet the general consensus is that it will make little difference to the inflation Britain is suffering.

So, why raise interest rates and was this the right move as the nation stares down the barrel of yet more (potentially overcooked) Covid disruption?

On this week’s podcast, Georgie Frost, Tanya Jefferies and Simon Lambert delve into the rate rise, ask whether it was the right move but maybe for the wrong reason, and look at why inflation is soaring and when it may abate.

The team also discuss how this will affect ordinary people and whether it will add to the cost of living squeeze hitting everywhere from the petrol pump, to your heating and the supermarket aisles.

Tanya gives an update on delayed state pension cases and her investigations into this and whether the generation in their late 40s will have to wait longer to retire.

And finally, it’s nearly Christmas and frantic present buying is the order of the day, but if you were going to give a financial gift to a child would you give Premium Bonds, shares or bitcoin?

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 Jeffreys. And coming up, despite the threat of Omicron, inflation proved the greater risk as the Bank of England finally raised interest rates. But was it the right move? Will it actually do anything to curbssoaring inflation, and how will a rate rise impact
0:21.9	your finances? Also today, the new state pension age, as we're told to work longer, when
0:27.5	will you be able to retire? Meanwhile, Tanya has an update on the state pension delays.
0:32.8	Could we finally see a crackdown on fraudulent ads and move over premium bonds, Christmas is going crypto.
0:39.8	Don't forget you start up to date with all the latest breaking money news.
0:42.5	Just go to this ismoney.com.uk or download the app at first.
0:46.9	After March, will they, won't they?
0:49.0	They did.
0:49.9	The Bank of England decided to raise rates this week from the record low of 0.1% to 0.25%, rather
0:57.2	against expectations. It's all in response to inflation, which hit 5.1%, but will it actually do
1:04.1	anything and how will it hit us in the pocket? Tanya, welcome. Firstly, a bit of a surprise, this move? Yes, in fact, I think when I was
1:14.6	last on the podcast, I thought that they would wait in the new year. And with Omicron, I think a lot of
1:20.4	people with the uncertainty in the economy right now would have understood if it had gone
1:26.3	back. Reading the comments, though, from the people involved and Andrew Bailey talking about it,
1:33.1	it seems like they considered on the Commonwealth really carefully and took it into account,
1:38.8	but we're weighing that directly against inflation.
1:42.0	And the 5.1% inflation really seemed to put the wind up them. The IMF weighed in
1:48.5	as well and warned about inaction bias and that might have prodded them into it as well. But what
1:55.6	Andrew Bailey was basically saying was that the Omicron crisis, although it might seem like the activity
2:02.9	is being dampened, it might actually not have an effect on inflation, and in fact, it might
2:08.2	even turn the inflation rate even higher. And so therefore, I suppose they felt that
2:15.6	they had to act.
	...

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