Bank of England Needs To Cause Recession to Curb Inflation
Published / Last Updated on 21/06/2023
Today, we saw the Office for National Statistics confirm that inflation had remained at 8.7% pa for the year to May, no change from April when most of us were expecting inflation to fall. We are still spending too much on alcohol, recreation. Leisure, restaurants, and hotels.
Tomorrow it is the turn of the Bank of England to set interest rates and whilst many expect a 0.25% increase to 4.75% pa, we suggest that the Bank of England needs to go further and risk putting the country in recession. In fact, we believe the only way to bring down inflation is to force a temporary recession.
We have warned about inflation and higher interest rates since the first phase of Covid-19 lockdowns (March to June 2020).
June 2021 – we warned that the then record low interest rate of 0.1% would not hold and that we should plan for inflation, higher interest rates and plan for when your fixed rate deal ends in our video “Low Interest Rate Trap After Coronavirus Lockdown”.
See: Low Mtge Rate
September 2021 – We warned that historically governments need inflation to devalue government debt. The UK’s debt for the pandemic is well over £500bn. This must be repaid in say 25-30 years but devalue it in the meantime with inflation in our video “Lessons to be Learned from 70 Years of Inflation”.
See: 70 Yrs of RPI
November 2021 – We again warned you that central banks and governments use inflation to devalue debt and to expect inflation, interest rates and a ‘boom bust economy’ in the video “Inflation Is A Government Tool They Manipulate”. Guess where we are now?
See: Inflation Rules
August 2022 – We warned of the “Impact of Higher Mortgage Rates”.
See: High Rates
November 2022 – We suggested in a video that inflation was going to spike and where to invest when it does in “Dividend Income To Beat Inflation in Recession” and that is what you may wish to consider now.
See: Divis v Inflation
December 2022 – We suggested in a video that you should consider “Pay Early Redemption Fees to Get Fixed Rate”.
See: ERC to Fix
Expect more pain tomorrow from the Bank of England but we firmly believe the US Federal Reserve got it right by increasing interest rates more aggressively than the UK and Europe and we believe the Bank of England needs to risk recession and increase interest rates higher than expected to shock the economy out of its inflation spiral.
If the Bank of England does not go the full 0.5% increase, as we suggest, then you know that they are still playing the “Inflation Is A Government Tool They Manipulate” game so that they keep higher inflation for a longer period of time to devalue public sector debt.
