Business Express is an online portal that covers the latest developments in the world of business and finance. From startups and entrepreneurship to mergers and acquisitions, Business Express provides reporting on the stories that matter most to business leaders and decision-makers.The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.
Inflation Interest and the Cost of Living What is Being Done | Business Express

Inflation, Interest and the Cost of Living: What is Being Done?

Inflation, Interest and the Cost of Living: What is Being Done?

The cost-of-living crisis is an ever-present threat to the average household in the UK. The cost of essential goods and services has continued to rise against stagnant pay packets, leading to hardship across the country. Food bank usage has increased dramatically, and there seems to be little light at the end of the tunnel. What is the mechanism behind this, and what is being done to stop it?

Inflation and the Cost-of-Living Crisis

Inflation describes the rising price of goods and services. There are numerous trackers and statistics used to follow the trend of inflation, with the Consumer Price Index (CPI) most often used by media outlets to describe the situation. 

Various different factors impact inflation, from geopolitical instability to economic conditions and even the employment rate. The current cost-of-living crisis is the result of a high rate of inflation, sustained for over a year – itself caused by Brexit-influenced barriers and costs to trade, and instability in the energy sector due to Russia’s invasion of Ukraine.

Rising Interest Rates

The UK government can institute measures to attempt to address the impacts of rising inflation, such as imposing caps on what energy companies can charge for natural gas. But from a fiscal standpoint, the Bank of England has more direct power to influence inflation rates – and has attempted to exercise it by raising interest rates.

Don't miss out on any breaking news or insightful opinions!
Subscribe to our free newsletter and stay updated on the go!

By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Raised interest rates are designed to stifle economic activity, in order to reduce borrowing. For consumers, high interest can be a good thing; tax-free ISAs enjoy higher rates of interest, for example. However, the high interest also applies to borrowing, disincentivising businesses from investing and, in theory, reducing inflation.

Is the UK Acting Responsibly?

But this isn’t what has been happening in practice. The Bank of England’s attempts to reduce spending are coupled with government efforts to stifle wage rises, under the suspicion that raising wages would raise inflation. Economists in the field of Modern Monetary Theory, such as Richard Murphy, see current actions as unwise and even themselves inflationary – causing more hardship to citizens and enabling businesses to continue profiteering.

The UK’s Economic Future

Ultimately, the rate of inflation is expected to come back down to around 2% by the end of the year. This is a natural and well-evidenced conclusion, based on previous inflationary events in the UK’s economic history. However, falling inflation rates are not the end of the story. 

Predictions abound that the UK is headed for another recession in 2024, having already narrowly avoided one at the start of 2023. As explored above, wages have not been adjusted to meet the new challenges brought on by the past year of inflation; as a result, even though inflation rates are falling, many in the UK will still be unable to afford their prior lifestyle – leading to reduced spending, reduced economic activity, and negative growth.

Recent Post: