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Inflation rate spike could lead to banks increasing rates ( and the ‘genuises’ in the City)

19 January 2011

Today's FT headlined with news that "Investors are betting the Bank of England will start raising interest rates in early summer after soaring fuel and food prices pushed inflation higher than expected in December."

Lets read that again, "... the soaring fuel and food prices.."..."inflation higher than expected".

Why was this not expected? Fuel and food prices have soared.

Ask any haulage company trying to negotiate increased prices to cover the rise in fuel prices.

The papers have been full of news of failed harvests throughout the World. Less supply - same or increased demand means higher prices. GCSE Economics week 1 - however, per the FT investors were taken by surprise.

No apologies for the cynicism after the latest round of bonus greed indulged in by our Investment Bankers.

What should we concern ourselves with?

  1. Inflation rates possibly hitting 5% this year
  2. Bank base rate rises in the next few months.

Consumers and businesses have enjoyed low interest and inflation rates for some time now. An increase will reduce the money in our pockets and hence effect our cash flow.

Be prepared.

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