Thursday, Apr 05, 2007
Too Little, Too Late?
BBC News: UK rates tipped to stay at 5.25%
Ludicrous vacillation over 1/4pt increase, when we need well-trumpeted full percentage point rises to prevent lunatics with credit cards and mortgage approvals from spending us into spiraling stagflation. MPC members, if you don't do what is necessary, we, the people, will hold you to account for your inaction!
Posted by royston @ 01:53 AM (163 views) Add Comment
15 Comments
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1. geed said...
As I said in a previous post
"The MPC's remit is to keep all that hot air in the Property/Asset bubble. This is their number one objective and lets face it they are doing a great job. It really is in the MPC's hands at present, The public are quite aware of the risks shadowing the property bubble and are looking to the MPC to reassure them that the cheap credit will continue, if it does which I strongly suspect it will, this thing will run and run.
Last CPI data showed they were 40%!! above target (2.8%). If their main objective was to control inflation against the CPI they would raise rates by at least 0.5% this month as their prior 0.25% increases are clearly not working, but of course other things are at play as Eddie George has revealed recently.
The buck stops with the MPC."
The UK economy is the housing market, above all costs they will do anything to keep it afloat. No Rise, and I expect a cut by the end of the year. Hidden inflation it is people.
2. Wannabeemigre said...
Out of interest has anyone sat down and worked out what would be the effect on this robust housing market of a 1% and a 2% rise in interest rates, that stayed with us for say 5 years? And being really vindictive here what would happen if interest rates rose to their long term average of circa 8%
3. David20040_0 said...
They are much more likely to cut rates rather than increase them, as soon as the hosuing market slows down the BoE will slash rates to keep the boom alive.
4. sold 2 rent 1 said...
I'm going for a .25 rise.
The shadow MPC voted for a rise last week.
They have been right on the last 3 occasions (2 of which were shock rises).
5. Tony Marshall said...
The pattern has been 1/4% rises each 3 months - they like consistency, so my bet would be another 1.4%. They know, deep down, that rates have got to rise or they are facing big inflation round the corner. Steady Eddie's 'sort that out' legacy leaves them with no alternative.
6. paul said...
I think you're probably right, geed. But it will end in tears.
Secondary rounds of inflation will mean that people try to adjust their income to cope with rising mortgage repayments - there's very little that will hide that, and when inflation tops 3% there will be serious questions being asked if the bank doesn't raise rates.
Then there's the moral hazard of lowering rates with costs rising - it will make people think that stretching themselves beyond their means is fine because the good 'ol BofE will always bail them out. Commentators will say that the BofE has lost the plot and their reputation will be in tatters (as will the GBP value).
7. george monsoon said...
Ok, I predict no change. This does not however reflect the .5% increase that SHOULD happen, and as stated the MPC will do everything possible to keep the housing market up. Thats great news for all the homeowners* who are creating a kind of capilary action with inflation.. i.e. its creeping up un-noticed. Anyone who isn't in the market yet is now goosed, good and proper. We the renters will all get poorer and poorer, while our peers, the VW's (Virtual Wealthy's) amas an equitable fortune for their retirement. I can't even risk putting my money in Gold, even though there is a shortfall in supply for china, I still think its a bad idea given the volatility of the world economy at the moment.
* homeowner - the misleading title given to one who owns nothing more than a promise.
8. mrmickey said...
I paid my mortgage off a couple of years ago on my terrace house but funny thing is I don't exactly feel like the the king of Brunei now, houses are now so expensive i'd have to take out a mega mortgage to move up the ladder so I'm hoping for a HPC like everyone else. So even if your in the property market the effects of inflation are screwing you, plus i'll have to sell the house when i retire and move overseas to have any sort of retirement.
9. Ticktock said...
Commentators will say that the BofE has lost the plot
No they won't unfortunately, we will, but they won't. The divergance of view between the 'man on the street' and the financial press is already huge, but they keep writting their propaganda, and folks keep on absorbing it.
Nobody in the financial press will write anything that exposes, or even hints at, the size of the fraud and deception that we are suffering. They wouldn't stay in a position to do so if it was felt that they might!
10. Fahrenheit451 said...
I agree with "sold 2 rent 1", and "george monsoon".
A few years back when the base rate was 4% we were alll talking about it going up to 6%. Yes it is slowly getting there, but look at the big picture, what happens in any one month is not a big deal, when people have mortgages for 25yrs and discount or fixed deals for 3 years, etc.
The big question is what is going to happen over the next 6 months?
If you do not allow for a 0.5% rise you could easily get into trouble. If it doesn't happen in 6 months it will probably happen in 12 months!
And when is the next election?
There is bound to be a drop to help Gordo stay in number 10.
Then it may start rising again, but will it top out at, 7%, 8%. If it's over this, then everyone who bought in 2003 with rates at 3.5% will see their morgage payments x3. Big problem and this could hit the housing market Hard. I am expecting not just a soft landing this year, but also a price crash and massive repossesions in 2008.
11. nearly30 said...
I am bit on this of 'No Change' idea - although I would suggest that the MPC raise interest rates by .25% this month and then again .25% in May.
Overall the step should be .5% rise in the very near future - but my sentiment on the 'No Change' comes from my cynical belief that the MPC does not want to damage the Easter to May Day property punter's sentiment towards the housing market.
With this in mind - I even have a strong suspicion that the MPC may not even touch IRs until June - yes June - hey MPC please prove me wrong and confirm that you are in control!!!
12. Davros said...
I don't think that the rise in rates is the crucial thing now, only the drop in rates at the start of the decade. Eventually all the debt has to be paid back, so for every boom, there has to be a bust of an equal magnitude. It's a simple as that (well assuming there's no huge growth in earnings, which there hasn't been).
13. harold said...
The £ is down against most other currencies, so the fx markets are clearly expecting no change. I think they're probably right, but it will be a close call. Obviously people like brain-dead Blanchflower will be against a rise, but others my out-vote him. My vote is for a .25% rise, but they will probably hold off until May.
14. Tara747 said...
I think the shadow MPC have called it, they will raise by 0.25%.
If they have the guts.
Anyone know any journos? Those comments by Eddie George should really be repeated again and again in big letters.
15. Sam said...
wait and see, (and watch the bubble get bigger).