Ed Conway and Ian King answer your questions after the Bank of England increases the base interest rate to the highest level in 13 years - 1% - and issues a UK recession warning.
Thursday 5 May 2022 23:55, UK
Thanks to data and economics editor Ed Conway and business presenter Ian King for answering your questions.
Scroll down to read their views on the interest rate hike, when things might improve, how bad they could get, what the effect could be on the housing market and more.
As it happens I spend a lot of my time seeking out positive news.
There is much to be reassured by: every year millions of people are pulled out of poverty. Life expectancy is rising in most of the world. Our standards of living are improving.
I agree that some people fixate unduly on bad news.
Indeed, I spent much of COVID trying to explain, via data, that the epidemiological prospects for the country were much less terrifying than many would make out.
That said, it's our job as journalists to try to explain what's happening in the world, and give as fair a reflection as possible. Sometimes the news is good; sometimes it's unpalatable.
Today the economic news is bad, unfortunately. I spent much of this morning looking for good news in the Bank's report. It was nigh on impossible.
What effect will this have on GBP? We have already seen a drop against the euro. Will GBP rebound?
Sterling has already sold off very dramatically against the US dollar on the back of the news 鈥� mainly, I think, because of the dismal economic outlook 鈥� and as I write is back to a level last seen in June 2020.
This is a mixed blessing, as it is good for hard-pressed exporters but puts the UK at the risk of more imported inflation.
It's a mug's game trying to predict where sterling goes from here but it has fallen by 5% against the US dollar in a very short space of time and so that may mean there is limited further downside.
Against the euro, if you are pricing a currency solely on the economic prospects of a country, don't forget that the eurozone's economic prospects are every bit as lacklustre as those of the UK. Everyone wants to hold dollars just now.
This country is finished and has been for months. Brexit was a big mistake. We used to have our own industries - the majority of them closed down because it was cheaper to buy goods from abroad. In my town alone we used to have at least 20 factories - all gone.
Not sure what this has to do with the Bank's forecast or today's news. You're certainly right that our manufacturing base has shrunk enormously compared with previous decades.
And I agree that this is a big deal - a far bigger deal than many economists and politicians sometimes make out. And you're right that most economic analyses suggest Brexit has weakened UK productivity and trade performance - not far off what most economists forecast before the referendum.
But it's hard to argue that the current price shock would be significantly better or worse had none of this happened. Most countries around the world are facing precisely the same cocktail of factors we are.
It is miserable for pretty much everyone, unfortunately.
How does this affect people getting a mortgage?
The mortgage market remains pretty competitive right now. There are plenty of good deals still out there, but I would expect that to change in the near future.
The Bank of England's most recent quarterly credit conditions survey pointed to lenders starting to row back on their mortgage lending and they are expecting an uptick in defaults. So it will probably get harder to obtain a mortgage 鈥� but anyone who represents a good credit risk and has a good deposit or who has plenty of equity, in the case of those remortgaging, should still be able to.
So millions of people are suffering because of higher gas, electric, petrol, food, council tax, water rates... basically everything increased in price. How does raising mortgage payments (interest rates) help anyone? It's like - things are really bad鈥� let's make it worse.
A good question, and effectively we spent much of today asking the Bank's governor and his colleagues variants of this question.
I'd be lying if I said there was an enormously convincing answer, but reading between the lines the point is this. First, the vast majority of pain we'll be feeling this year is due not to interest rates but to higher energy costs.
Second, there is an alternative, scary vision where instead of coming down quickly, inflation stays high, then wages go up, and then prices go even higher.
That's commonly known as a wage-price spiral and it's essentially the Bank's nightmare. It would potentially be an even worse outcome for everyone than what's forecast this year.
So from that perspective, there's an argument that if higher interest rates help (at the margin) to bring inflation down, then perhaps that's a good thing. But that's a tricky message to deliver.
Could this rate rise lead to a housing market crash or to house prices reducing?
At the moment my bet would be on the pace of house price inflation - which has been at elevated levels - moderating, rather than for house prices slamming into reverse.
That said, it has been a seller's market since the start of the pandemic, which has led to some asking prices taking the proverbial. I would expect a bit of rationality to creep back in.
Can you provide a table comparing inflation rates in different countries, particularly G20 and Europe.
How high do you think interest rates could be by the end of the year - is the trend pointing to double figures?
Here I refer you to what the Bank said today. It notes that financial markets are expecting the Bank Rate to be "just over" 2.5% in mid-2023.
The Bank's latest market participants survey, published in March, points to the Bank Rate being between 1.25-1.5% by the end of the year. We are certainly nowhere near Bank rate hitting double figures.
How inaccurate do you think the official inflation figure is? Many items seem to being rising in price way above the official figure. For example one item I buy weekly has gone from 拢1.15 to 拢1.45 and another has risen from 55p to 70p. All over the last two to four weeks.
To be honest I think they're pretty fair.
Ever since the invention of inflation people have argued that it is understating what鈥檚 really happening with prices.
But the issue here is that sometimes one's personal perceptions are not representative of the average household. I often think my own personal inflation feels a lot higher than the numbers published by the ONS each month.
But they have to look across the entire economy, at all costs, rather than at prices for a single household.
John: