With rising food costs and energy bills, Britons can expect a one-year pause in any growth of living standards and will continue to face tighter household budgets. It has been reported that the latest increase in petrol and food costs is preventing policymakers from cutting interest rates. Unfortunately, consumers may see a rise in interest rates if inflation spreads to reach more aspects of the economy.
In short, the increase cost of food and petrol is funneling through to retail prices and household expenses causing quite a strain on consumer budgets and consumer purchasing power. The country may need to take action if this economic activity continues as it may shift into longer-term inflation in the near future. Policymakers at the Monetary Policy Committee are facing their greatest challenge since the bank was granted independence in 1997 thanks to a combination of falling house prices and a drastic rise in other costs such as food and oil.
According to King, it is likely that banks will remain closed to several of the more complex financial tools blamed for triggering the credit crunch. Banks will shift their focus to providing more needed services to its customers instead. The path of the mortgage market within the banking sector will in all likelihood start down a different path, albeit one far more uncertain than expected previously.
Some report that the MPC is not in any rush to decrease interest rates but believe that inflation may be what the bank needs to regain focus and work toward moving rates from 5pc to the targeted 2pc. Others have been surprised by the change in market expectations regarding interest rates. At one time, the market was expecting anywhere from two to three cuts and then quickly changed to expect two to three interest rate increases. Governor King of MPC has reported that he expects inflation to rise more than 4pc near the end of the current year, warning that a series of sudden rate increases places the UK at a serious risk of recession.
The message sent from the banking sector of the market is certainly not comforting for consumers trying to make sense of the inflation warning and tangible increase in food costs, oil prices and household bills. Rather than waiting for rates to decrease, which does not look hopeful before a true inflation hits, households may want to consider supplementing their income to compensate for the increased cost of living today.
Besides finding a second job, one option is to look into online opportunities for earning extra money. One such opportunity many have taken advantage of is gaming, the largest growing online industry. More advanced software today makes it possible for ordinary people to earn easy, risk-free profits by using a unique investment method called arbitrage trading. Futures trader Rajeev Shah discusses arbitrage trading in more detail in his book SSports-Arbitrage – How to Place Riskless Bets and Create Tax-Free Investments. In short, these arbitrage opportunities occur when different bookmakers’ prices on the same events overlap providing traders guaranteed cumulative returns as high as twelve percent each month. To add to this already compelling opportunity, the UK Government recently announced through the Treasury that profits from arbitrage trading will remain free of income tax and capital gains tax. For consumers struggling to meet basic expenses today, a twelve percent return on profits could be the solution they need to make it through the credit crunch.
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