Friday, Jan 12, 2007
Place your bets for next month
The Telegraph: Scare for City as price index catches alight
It was perhaps the biggest shock ever delivered by the Bank of England since it was granted independence. But, as traders counted their losses last night after the surprise increase in interest rates, it was becoming increasingly clear that the seeds of their misery had been sown many hours before, by an apparently innocent-looking note sent to the office of Mervyn King.
Posted by sold 2 rent 1 @ 05:09 PM (163 views) Add Comment
7 Comments
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1. sold 2 rent 1 said...
I am betting on another .25 next month.
The shock factor seems to be the preferred tactics
Until yesterday, most of the economists were talking about a peak of 5.25 before cutting.
No wonder the consumers were still rampant
2. Sam said...
I think they may hold off. Even though it makes sense to increase it due to petrol prices normally going up in the summer.
3. denzil said...
I'm with you s2r1, another quarter next month. After yesterdays decision I really would not be surprised to see a .50% increase if required. Something genuinely has spooked the MPC. They dithered for too long and it may take a few sharp shocks to reign in the inflation beast.
In reality interest rates will probably keep rising to return to the long-term norm but the real big problem is that Gordon "Chubby" Brown's miracle economy is built on low IR's not the historic average, which for reference between 75 and 93 was 9.3%.
4. iguana said...
Denzil & s2r,
I too see a further rise, and spookily am thinking of .5% when the money markets get a whiff of the jitters within the BOE.
5. harold said...
Given sterling’s rise over the past 6 months (an particularly since yesterday) IMHO they will feel compelled to hold back until March (alas). Against the euro the £ is ridiculously high (UK tourism industry must be crying into its beer). I too guess that inflation fears are behind this move - money supply is out of control and has been for some time. Truth is, however, .25 is probably too little too late to stave off serious inflation - but if they rise in Feb. the public/press will lynch them.
6. Egarbarino said...
"...though the increase in rates will be good news for savers."
It should read something like
200 words of = "This is great news for all the people that save and have been planning this future, blah, blah"
And only after that,
"though, the increase in rate will be bad news for borrowers"
7. C'mon Correction said...
I think March for next hike, sterling is very high and would create real panic. I my opinion they should hike next month and should by .5 - but they won't. Again this in-action will mean we will likely see 6-6.25% within 18 months.
The MPC have been accused of 'being one of the most Hawkish Central Banks in th world' by many economists in the aftermath of Thursday. This i feel is very strange? Why say that; on traditionial rate level ratios we're now only equal with the Dollar, our Debt levels are HUGE and we have the most over-priced property values anywhere in the world? I think we'll suffer from inflation and previous in-action of the MPC worse than any other developed nation, and will have to over-shoot on rates quite considerably.