Wednesday, Jan 24, 2007
Pound falls on MPC split
FT.com: Sterling off 14-year highs against dollar
Sterling retreated further from a 14-year high against the dollar and the yen on Wednesday, as the minutes from the Bank of England’s monetary policy committee meeting revealed that four of the nine members voted against January’s UK rate rise.
The market had been expecting a seven to two vote in favour of raising rates. The minutes should dampen expectations of another rise in interest rates as soon as February.
Posted by dohousescrashinthewoods @ 12:51 PM (135 views) Add Comment
8 Comments
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1. bidin'matime said...
The lack of consensus in the MPC is likely to have a negative impact. If they can't agree on which way it all needs to go, then this will tend to (further?) undermine confidence in them.
2. paul said...
It just shows that even when they are about to overshoot their target, they are still a buggers' muddle of indecision and inaction.
Astonishing.
3. C'mon Correction said...
As a group they are much more Dovish than Hawkish. At the very limit of their upper target almost half still want to sit on their hands. - Incredible ????!
With this inaction - I don't see why rates won't hit 7%+ within 3 years.
" A stitch in time, saves nine" - as my Gran used to say !
4. Whiteknight said...
Lets see.... the extract at the bottom is taken from a BBC News article. Upon being faced with something the MPC thought had "no chance" of happening - they still use the same strange arguments to justify why they know what is going on now.
The MPC is an embarrassment. Why are they being paid again? Not only that - one guy is being flown in from the States every month if i understood correctly.
For example, when will they understand that the unfortunate response to large scale immigration to keep wage costs down (country couldn't survive without it) is unionisation and disruption as the people already present resist to maintain their living standards.
When will they further understand that we are well beyond words. They need to stop messing about and get interest rates up a percentage point at a minimum. Also, they need to ensure people understand that 0.25% a month is not a standard. Raise it 0.50%.
Due to a lack of understanding they are already pushing up interest rates at exactly the time of wage settlements which in itself is inflationary. Thats hardly elegant monetary policy management.
And finally... when .. oh when .. will people realise that this inflation (real inflation) is a direct result of the bankers printing money. What do smart people do when the money they are being handed is becoming worthless. Oh .. thats right .. they purchase commodities .. which in turn fuels real inflation (it CANNOT be avoided by one route or another).
[UK PROPERTY ASSET POSITION: long NO UK property either directly or in trust. And not likely to be even after a crash.]
"Back in late 2004, when it was setting interest rates to hit its 2 per cent consumer price inflation target two years hence, the monetary policy committee calculated there was only a 12 per cent chance of CPI inflation exceeding 2.5 per cent at the end of last year. The following August it was almost cocky, putting only a three per cent probability on that outcome and suggesting there was no chance of inflation rising above 3 per cent.
So great has been the surge in inflation, however, that what was once thought almost impossible is now reality. CPI inflation hit 3 per cent in December, the highest in 11 years; the fourth quarter CPI inflation rate rose to 2.7 per cent; retail prices index inflation at 4.4 per cent was at its highest rate for 15 years; and RPIX inflation, which excludes mortgage interest payments and was the Bank’s target measure before 2004, rose to 3.8 per cent."
5. george monsoon said...
Not to appear obvious, but the stock exchange think that the near vote means that interest rates have peaked.
I disagree and recon that the MPC split exists because some members didn't want to put the sting on until Feb.
I predict a rate freeze in Feb and a further increase the following month... then another.
6. Nohpc said...
This is a relief to home owners. It is unlikely that rates will rise much higher now. I am not even sure they will rise higher than 5.25%. With CPI at 3.0% and still many BoE members voting against a rise that just shows that they are very worried about the prospects of raising rates further. Phew!
7. harold said...
"It is unlikely that rates will rise much higher now."
What on earth do you base this spurious logic on?
Head in the clouds.
8. C'mon Correction said...
Nohpc - you're weird mate.