There’s a lot of difficult news out there today, but one thing that seems to have passed everything else by are the comments made by the International Monetary Fund about the Bank of England’s forecasts for Inflation over the next few years.
A BBC Business Report today revealed that The IMF ‘warned Bank of England rates would peak at 6% and stay around 5% until 2028’.
‘Accepted’ Interest Rates are currently 5.25% and with a General Election perhaps only months away, it sadly comes as little surprise that the mainstream Political Parties are playing down the issues surrounding inflation and making claims that they have the strategy to get a grip on the problem.
The trouble for anyone struggling to make ends meet – and specifically to keep buying the food that they may still be able to now – is that even if the real rate of Inflation were to fall to around 3% per year, that would mean that the cost of food, goods and everything else would still be rising by at least £3 for every £100 that we spend.
Contrary to the way that Politicians talk about this very serious issue on the news, Prices are not falling and are not going to fall anytime soon, whilst thinking remains the same.
To illustrate the point that the IMF was making, I quickly ran through the upward changes that just a 5% interest rate would have on the value of buying £100 worth of food or goods for each of the next 5 years – until 2028.
The reality is that by 2028, and a 5% yearly price rise, we will already be paying over a quarter of the prices that we are again.
Wages and incomes are not going to meet this kind of rise – assuming that nothing else other than the politicians who are in power change, between now and 2028.
That’s a worry for us all.
Adam Tugwell 