Reader’s Question: The Central bank is raising interest rates (I understand why). At the same time, the government is being called to reduce taxes. These appear contradictory policies to me? What am I missing? In summary You are right they tend to have opposite impacts on consumer spending and economic growth. Higher interest rates tend …
Current UK Inflation Rate CPI inflation rate: 2.3% (headline rate) CPI – D7G7 at ONS Source: Raw data General inflation tables | CPI annual % change D7G7 at ONS Other measures of inflation (CPIH) CPI including owner occupiers’ housing costs – 6.2% (CPIH – L550) See: Measures of inflation Reasons for low inflation in …
Readers question: Keeping a lower deficit of the National Budget would benefit Americans as interest rates would remain stable and allow new businesses to grow. Would you say this statement is correct? In theory, there is an argument that a rising deficit can cause a rise in bond yields and interest rates. Similarly, there is …
In recent years, we have had a devastating global credit crunch, the longest and deepest recession since the 1930s and then the impact of Covid. Yet, despite this financial and economic upheaval, UK house prices have bucked the trend, avoided a major collapse and now exceeded pre-crash levels. The economics of Covid have even made …
The UK has avoided any situation of hyperinflation. The highest rates of inflation were after the Napoleonic War in the early nineteenth century. During the First World war (25%) and in the 1970s where inflation rose due to a rise in oil prices and strong wage growth. After the late 1980s inflation was brought under …
A look at how the housing market and changes in house prices affect the rest of the economy. In summary: Rising house prices, generally encourage consumer spending and lead to higher economic growth – due to the wealth effect. A sharp drop in house prices adversely affects consumer confidence, and construction and leads to lower …
The housing market is influenced by the state of the economy, interest rates, real income and changes in the size of the population. As well as these demand-side factors, house prices will be determined by available supply. With periods of rising demand and limited supply, we will see rising house prices, rising rents and increased …
Cost-push inflation is caused by higher costs of production, such as rising oil prices, higher nominal wages, and increased commodity prices. To reduce this kind of inflation, the government can pursue deflationary monetary policy and/or supply side policies. But, in truth, it is difficult to reduce cost-push inflation because higher interest rates are likely to …