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Save Our Savers asks the MPC to act to reduce inflation
On Wednesday and Thursday this week, nine grey-suited men will meet at the Bank of England and discuss inflation and interest rates. They are Sir Mervyn King; Charles Bean; Paul Tucker; Ben Broadbent; Spencer Dale; Paul Fisher; David Miles; Adam Posen and Martin Weale.
We can only speculate whether they have a preference for Hobnobs, Digestives or those weird pink wafers you get in biscuit assortment boxes. What we can be pretty certain of, however, is that all but Martin Weal and Spencer Dale will vote to keep bank rate at just 0.5%, as it has remained since March 2009.
The MPC is charged with keeping inflation at the Government’s target of 2%, yet CPI is 4.5% and appears to be heading higher. By our estimate, the real value of the country’s savings has lost over £50 billion in the past 12 months. With an effective transfer of wealth from savers to borrowers, the thrifty and the responsible are involuntarily subsidising the profligate and foolish. As David Cameron said, while in opposition, increasing debt and undermining savings is “both economically stupid and morally indefensible”.
We have written to the nine members of the MPC, highlighting the pain being endured by savers and those on fixed incomes.
On Thursday, we expect they will reply by keeping the bank rate at 0.5% and savers will know that the misery is set to continue.
This is the text of our letter to the MPC members;
Dear Committee Member
On behalf of the country’s millions of savers, Save Our Savers calls upon the Bank of England’s Monetary Policy Committee to act urgently to bring inflation under control, as its mandate requires it to do.
Inflation has reduced the real value of the nation’s cash savings by more than £50 billion over the past twelve months
Savers and those on fixed incomes, such as pensioners, are suffering terribly from the combination of extremely low interest rates and above target inflation. For many this is not a temporary setback. Its effect will permanently reduce the value of their future income.
Although the MPC is charged with keeping inflation in line with the Government’s target of 2%, the Consumer Price Index has exceeded this every month since December 2009, reaching a two-and-a-half year high of 4.5% last month. The Bank of England’s own quarterly report on inflation warns that inflation might reach 5% this year. Even this may be optimistic: for the past four years, the Bank of England’s forecasts have consistently underestimated inflation.
Within the past month, both the Organisation for Economic Cooperation and Development and the Bank for International Settlements have warned that high inflation risks becoming embedded in the UK economy. This, warned the BIS, has damaging repercussions for long-term growth, while low interest rates risk “encouraging dangerous risk-taking in…financial markets”.
As the Bank of England says in one of its own publications: “Low and stable inflation is crucial to a thriving and prosperous economy.”
We are in a recession intensified by the highest level of consumer debt in our history and yet the MPC’s inaction is undermining the propensity to save and exacerbating the problems of an unbalanced economy.
A country without savings is a country without a future.
We request that the MPC observes its mandate to bring inflation back under control.
Jason Riddle, Simon Rose
Save Our Savers