Editorial: ​Savers always seem to be ignored in the debate around interest rates versus inflation

​Every time that interest rates are cut, as they were this month, a wide cheer goes up.The Bank of England lowered rates to 4% a fortnight ago, and there are forecasts that rates could go as low as 3% next year.

Fine. Great. Etc. Which business or homeowner with debt would want them to go up? The problem is that rates have been abnormally low for the better part of 20 years.

UK rates were normal in the run-up to the 2008 financial crash, indeed lower than medium-term normal, at around 5%. But they were slashed to under 1% in 2009, where they stayed until 2022. In fact, during the covid pandemic they were pushed even lower, to essentially zero (0.1%). Savers were on the verge of having to pay banks to hold money.

This is all to help the economy we are told, and there is no doubt that radical action was needed at times – both ultra low interest rates and quantitative easing (in effect printing money).

There are two big problems with all this. First, if interest rates are too low, inflation will get worse. Sure enough inflation has been far too high since 2018 – prices are up a third since then.

Second, the impact of this on savers and a saving culture. Why do so few voices speak for that army of people across the UK, numbering more than 10 million, who work hard, put money aside and do not rely on others to support them?

Inflation rose last month more than expected to 3.8%. Anyone who has had cash in long-term savings accounts for the last 20 years will almost certainly have lost money in real terms.

Yet all the political noise and even outrage is directed at any politician who even hints at the idea that perhaps people who do rely on others to help them, typically the state, might have to share in the economic burden just a little bit via reforms to benefits so that we can help the backbone of our society: people who work hard and save.