THE BANK of England Monetary Policy Committee met yesterday and decided to increase the interest rate by 0.25% to 0.75% in a futile attempt to halt inflation spiralling out of control. It is the third time in four months that the rate has been increased.
Officially inflation is currently at 5.5% and the Bank is predicting it will increase to 8% and higher in the coming months.
In a statement, the Bank said that the increase was justified ‘given the current tightness of the labour market, continuing signs of robust cost and price pressures and the risk that those pressures will persist’.
The committee made it clear that this was just the start and that more interest rate rises ‘might be appropriate in coming months, but there were risks on both sides of that judgment depending on how medium-term prospects evolve’.
In fact, the immediate prospect for world capitalism is one of raging inflation and global recession, over which none of the central banks have control.
The Bank’s committee made a passing reference to this when it noted that the imperialist war against Russia and the economic sanctions imposed to try and strangle the Russian economy ‘was likely to push up prices even faster than the Bank expected’ adding that ‘the economy has been subject to a succession of very large shocks’, with the higher global prices for energy and other goods driving inflation beyond any previous predictions.
Increasing interest rates will make it more expensive for banks, companies and individuals to borrow money.
This will drive up the cost not just of mortgages but of all goods and debt repayments as banks, credit card companies and industries pass on the increased costs of their debts to customers.
This will force people to spend less and the Bank hopes this will tempt people to save more in the knowledge that the interest on savings will increase.
In fact, the banks have made it clear that any increase in the interest rate will not be passed on to those fortunate enough to have savings as it’s a ‘competitive’ world for bankers and they need every penny they can get their hands on.
No upside, even for the middle class with money in the bank, but a tremendous hit on workers whose wages have been held down below even the official inflation rate and on the millions who rely on Universal Credit just to survive.
The interest rate increase will throw even more fuel on the price inflation of all goods and services, plunging tens of millions of workers and their families even deeper into poverty.
This is all the Bank can offer to try and tame inflation – make workers eat less and stop heating their houses in the hope that prices will fall as a result.
Only one member of the committee, Sir Jon Cunliffe, voted against the increase with the Bank’s statement recording that he ‘placed great weight, at this point, on the very material negative impacts of higher commodity prices on real household incomes and activity’.
It will also have a very negative effect on all these companies that have existed entirely through cheap debt along with the hedgefunds that use debt to fuel their multi-million pound takeovers.
It will also drive up the cost to the Tories of financing the record £2.4 trillion national debt.
With British capitalism already being suffocated by out-of-control inflation pushing up interest rates, with the promise of more to come – this will only accelerate the collapse of British capitalism into recession.
With no way out of this crisis through trying to manipulate interest rates, the only way capitalism can survive is by inflicting the crisis on the backs of the working class, forcing them back to conditions last seen in the 19th century.
The powerful working class will not stand by and see their lives destroyed but will demand that their unions take action by organising a general strike to bring down the Tories and bring in a workers’ government and socialism.
A workers’ government will nationalise the banks and large industry placing them under the management of the working class replacing bankrupt capitalism with a socialist planned economy.