Wednesday, Jan 24, 2007
Will interest rates rise again next month?
MoneyWeek: Will interest rates rise again next month?
We're moving ever closer to the $2 pound...and closer still to a 5.5% UK base rate.
Sterling hit its highest level against the dollar in 14 years, heading above $1.99 due to a quarterly report from the Confederation of British Industry (CBI). The survey showed that the number of businesses reporting that they had hiked prices in the past three months had hit its highest level since 1995.
The stronger-than-expected data may have been good news for anyone getting their holiday money for a trip to the States - but it's not so great for anyone who'd hoped that interest rates had peaked this month...
Posted by mary @ 10:21 AM (138 views) Add Comment
10 Comments
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1. tyrellcorporation said...
Will the Hawks stay hawkish? - no reason why not...
2. Sam said...
I've got this funny feeling they may hold next month even though they should be raised. I think this because even with the report they had in Jan four of them decide to hold. -- What complete and utter twunts.
3. talking rot said...
Yawn. I would like another hike in rates but I do not believe the hawks will stay hawkish. Last month's call was 5 vs 4. Not much evidence of a further 0.25% increase in Feb, what with the Gov'n saying he expects inflation will fall,possibly quite sharpishly, during mid-2007.
Hopes of an interest-rate driven HPC rose in Jan but will fall away quickly in Feb and Mar. Prediction: No change during Feb 2007 and Mar 2007.
4. inbreda said...
Presumably TR you have read a report that all of the businesses that are planning on raising their prices are planning to severely CUT their prices by mid 2007? I'd like to see that report - could you post a link? Because otherwise I can't see the planned prices rises happening and completely feeding through to the inflation figures, subsequently being cut, and the prices cuts feeding through to inflation, all within the next 6 months. Is that what you are suggesting?
5. C'mon Correction said...
If they keep on playing down the fact that inflation is really high and keep suggesting that rates will fall again, then people will not learn that they are taking on way, way too much debt.
We need really hawkish comments and more rate rise action in order to let air out of the HUGE credit& asset bubble to get the UK economy back onto a sustainable track. If they don't put the brakes on we're going to smash into the wall 2-3ish years down the line and the UK economy will never recover.
6. talking rot said...
inbreda
When you say "Because otherwise I can't see the planned prices rises happening and completely feeding through to the inflation ..." did you really mean "... CAN'T see the planned prices rises happening?"
Without wishing eggs and grannies, as the MPC is targetting future inflation then they believe future inflation will be lower. Perhaps your planned price rises will be offset by greater price falls occuring elsewhere. Perhaps oil will continue its downward trend, or the energy market will push up prices at a lower rate, or perhaps CD-Players will become even cheaper. My point is that the MPC have been uncannily right so far (with the exception of the 0.25% cut in Aug 2005) so perhaps they will be right again.
I hasten to add that they have been right using "flawed" measures - or in my opinion many of their measures are flawed, the CPI for example, bears little resembalence to reality.
7. Cheekie Charlie said...
A poor advert for democracy
8. inbreda said...
TR - the MPC seem to have been happy to ignore rising iol prices in the past on the assumption that they will in the future fall. It is starting to look as though they are making excuses to ignore the data and sit on their hands. The fact that inflation is above target and has been for some time - the fact that it is pushing the upper barrier - and the fact that their have been 'surprise' rises and 'surprise' leaps in inflation suggest that they have not been 'uncannily right so far'.
9. paul said...
Inflation has been above target for eight months now.
I'm quite sure that they said after the first month that it was a "temporary blip". They are proving themselves consistently wrong and consistently incompetent. I believe less and less what they are saying.
10. Ticktock said...
Merv. talked to stop the yanks diving further into stirling and it worked (for now). Inflation is 'in the DNA' of our out of control economy and no amount of wishful thinking will change this. Even if energy prices continue do continue to fall, the massive explosion in money supply will continue to bubble up asset prices. The MPC have to either keep turning the screw, or loose all that remains of its credibility. (in my opinion)