The Rest Is Money 174. What Is Really Going On With Inflation
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May 21, 2025 Delve into the tumultuous world of inflation, now surging to 3.5%, and discover how it's affecting consumers. The Monetary Policy Committee’s internal strife sheds light on the complexities of interest rate strategies. Hear critical insights on tax proposals impacting savers and investors alike, plus the implications of a recent U.S. credit rating downgrade that could shake investor confidence. This lively discussion illuminates the intersection of policy, economy, and personal finance.
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Inflation Surpasses Expectations
- Inflation rose to 3.5%, higher than expected, driven by energy, food, and transport costs.
- Employers passing tax and wage increases onto prices fuels inflation beyond initial projections.
Indirect Taxation Through Prices
- Rising employers' national insurance and minimum wage hikes are passed on as higher prices.
- This indirect taxation reduces consumers' disposable income despite intentions not to tax workers.
MPC Division over Interest Rates
- The Bank of England Monetary Policy Committee is deeply divided on interest rate cuts.
- Chief economist Hugh Pill, formerly silent, now openly dissents believing inflation is still too high.