Why is the Bank of England raising interest rates into a recession?

This is Money Podcast

This is Money

Business News, Business, Investing, News

4.1 • 650 Ratings

🗓️ 5 August 2022

⏱️ 53 minutes

🔗️ Recording | iTunes | RSS

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Summary

The idea of the Bank of England raising base rate by 0.5 percentage points at the same time as warning about a long and painful recession would have been unthinkable a year ago.

But things have dramatically changed and central banks are desperately trying to get a grip on runway inflation that just seems to keeo getting worse.

Base rate has risen from 0.1 per cent in December to 1.75 per cent now and is set to keep climbing, but why trigger a recession to get inflation driven by outside forces under control.

On this podcast, Georgie Frost, Tanya Jefferies and Simon Lambert discuss the rate rise and potential recession and what it means for borrowers, savers, the economy and our financial near future.

Also on this episode, how can you prepare for the mortgage crunch as rate rises hit homeowners and Simon gives his tip on how to take the temperature of the property market... by looking at what's not selling.

And Tanya gives an update on two important pensions issues: women's lower retirement savings and how to keep more of your pension pot out of the taxman's clutches.

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.
0:10.0	And coming up, interest rates hiked, inflation soaring, recession imminent. Is there any good news at the moment for struggling households?
0:17.0	Two-year fixes have more than doubled since December. How can you find the best
0:21.2	mortgage deals out there? Meanwhile, the housing market may look like it's still on fire,
0:25.5	but Simon's not so sure. Also today, we talk about the gender pension gap and Tanya gives
0:30.7	us some tips to defend your pension from the taxman. Don't forget you can stay up to date with all the
0:35.2	latest breaking money news. Just go to this ismoney.co.com.uk or download the app.
0:41.6	Market updates and conversations around the financial world don't have to be boring.
0:45.9	The Digest and Invest podcast by E. Toro is a great way to tune into what's happening in a fun
0:50.6	and easily digestible format. Discover the Digest and Invest Podcast at utero.com forward slash academy forward slash podcasts.
0:58.4	But first, we got another rate rise from the Bank of England this week,
1:02.3	along with some pretty dire predictions about the state of the economy.
1:06.2	The move, the sixth increase on the bounce since December,
1:08.7	and the largest in 27 years, is in response to soaring inflation, which the bank now expects to peak at over 13%. Meanwhile, leading think tank reckons inflation will soar to astronomical levels over the next year, forcing the Bank of England to raise interest rates higher and for longer than previously expected.
1:27.7	RPI is predicted to reach around about 18%.
1:32.0	And that's the measure, by the way, linked to things like rising train prices,
1:35.9	mobile tariffs, student loan interest and car tax.
1:40.5	Pretty gloomy stuff, Simon Lambert, taking a look at the front pages of all the newspapers
1:47.8	the day after the interest rate rise and the rather gloomy predictions from the Bank of England.
1:52.8	Firstly, the interest rate decision, why are the Bank of England doing it? Is it necessary?
1:58.9	Will it do what it's intended?
2:01.6	Well, at the expense of sounding like someone who's saying, I told you so, there were a number of people, including members of the people who regularly take part in this podcast, who had been suggesting that maybe central banks might need to start raising interest rates a little bit sooner than they were doing so
	...

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