Monday, Apr 30, 2007
Relax - Everything is under control
Times: One rise in interest rates should be enough, say economists
Only one further increase in interest rates should be enough for the Bank of England to bring inflation back to its 2 per cent target, despite mounting fears that it could take more aggressive action, Britain’s leading economics institute says today.
Posted by holding out @ 09:15 AM (32 views) Add Comment
8 Comments
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1. dohousescrashinthewoods said...
Two chances: fat and slim.
2. Planetmervyn said...
Yup. One further increase in rates to 8% should do the trick. That should account for the inflation effect resulting from rising oil prices which nobody seems to be considering at the moment.
3. bingo said...
Obviously it depends on how big the interest rate rise is doesn't it?! I figure a couple of percent should do it.
4. The Haunted said...
Nice one Bingo, you beat me to it. I seriously hope that no one thinks a 0.25% increase will be enough to bring inflation under control, at least no one who is supposed to be an economist. One again I am forced to say "a clowns shoe".
5. Whiteknight said...
rubbish
6. sold 2 rent 1 said...
At the moment it looks like inflation is a problem and IRs need to be cranked right up.
But with no wage-price spiral on the horizon and real disposable incomes falling how long can we hold this view?
When the stock market crashes later this year and HPs start going down from Q1 2008, consumption will fall off a cliff.
Only at this point will we realise that we have a deflation problem on our hands.
As contrarians, is it time we changed our consensus view of inflation, ahead of the mainstream view.
7. Rocketrobbie said...
s2r1
Is now a good time to tie up your morgage for 5 years or more. I am worried if i dont get a long term fixed rate then interest rates will rise and i will lose out. I know you will probably say sell the house but my wife dont believe in hpc
8. sold 2 rent 1 said...
Rocketrobbie,
My wife was unsure about HPC at first. It helped that her flat we sold recently was in Dublin and prices are falling there now.
Regarding your fixed term dilema:
My view, which is not shared by everyone on this site, is that rates will rise to 5.75 - 6.25 by the end of the year.
The riggged CPI figured will allow no more rises than this.
If there is a15% drop in stocks in the autumn then the economy should slow as we move into 2008.
If this deflationary outcome that I am predicting comes true then a fixed mortgage for 5 years could backfire on you.
In fact fixed rate motgages make the BOE's IR tool much blunter in both directions.
They make the BOE have to raise rates higher to slow the economy, then they also fail to stimulate the economy when it slows sharply.