Tuesday, Jun 05, 2007
On the bus, off the bus ...
The Indepedent: Tough month for retailers makes rate rise unlikely
An alternative view on the need to raise interest rates. Jane Padgham, writing in The Indepent, reports "In findings that will cement expectations that the Bank of England will freeze borrowing costs this week, the British Retail Consortium said the high street suffered its worst month since last November as stretched consumers shunned new spring fashions." Perhaps The Independent will follow the line of The Times? I reckon the spinelessness of the MPC means we're still on for 5.75% by end of 2007 with cuts in 2008.
Posted by talking rot @ 09:18 AM (129 views) Add Comment
11 Comments
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1. Realist said...
Yes, I mean god forbid that the high street frenzy should slow. We should be encouraging more people to spend more money that they haven't got on credit.
2. Wojtek said...
Odds are against interest rates change:
http://sports.betfair.com/Index.do?mi=20409227&ex=1&origin=MRL
3. Wage Slave said...
The MPC could make a pre-emptive rate increase to show they mean business and they're taking control.
Or they could make increases too little, too late.
What do you think ?
4. dohousescrashinthewoods said...
Which would mean inflation out of control and a falling pound.
Time to emigrate?
5. Pr said...
The independent always do this, every bit of data touted as signalling a rise or fall in interest rates, without summarising the past month's data to give a rounded picture. The majority of reports recently in this very paper have been hawkish. Even this article is inconclusive, it recognises food price pressures and, remember that 1/5 of all money spent in shops is at Tesco's, which will probably be in a position to pass on rising food costs. Remember that petrol has gone to £1/litre, representing a significant deviation from the BOE's projections, which were predicated, conservatively, on requiring a 5.75% rate, and petrol is likely to stay high for much of the summer.
Note that representatives of the retail industry here are warning against a rate rise, because they want to pass on higher costs. White goods and fasion have to be sacrificial lambs when commodities and necessities are inflating, because something has to give, that is the whole point of higher interest rates. Watch oil prices during the summer, with the american driving season, instability everywhere and the prospect of a damaging hurrican season in the gulf of mexico. And, almost as important, watch America's interest rates, if they rise to 5.5%, as expected, then the pound will plummet, rising imported inflation to painful levels, forcing the BOE to rise our rates in competition for currency value. I still say 6 or 6.25% by January next year and at least 5.75% by August. There's no chance that rates will start to fall in 2008 with the BOE's own projections requiring 5.75%, on conservative economics, to get inflation pegged to 2% within the next couple of years unless there is a sudden outbreak of political stability and if there is a sudden, unlikely abudance in markets that suppresses commodities like oil and food.
6. waitingfor hpc said...
bigger picture still certain. IR's will rise and have to.
7. paul said...
If spending is falling and inflation rising, the MPC's first objective will still stand.
If it doesn't, or if they chicken out, then the Bank of England risks an inflationary spiral of its own making.
8. tipping point said...
IMHO there are only two things that should influence their decision. Inflation and the exchange rate. Inflation has to be tackled and given the current stong euro against the pound there is no overriding reason why rates should not rise.
9. doomwatch said...
IMHO the MPC should wait until tomorrow morning when the usual advice for
them is trotted out in the Times and the BBC web site.
10. royston said...
1. Retail sales are still rising (albeit at a lower rate)
2. OECD, IMF, World Banks and eminent UK economists all say UK inflation is out of control
3. Money supply is through the roof
The reputations of MPC members are on the line now. I expect to hear the usual 'steady-as-she-goes' rhetoric from them. But it will be very interesting to see what they actually do.
11. Orwell said...
Real RPI is nearer 6% and even the establishment mouthpiece the Telegraph admits they may officially reach 5% (god alone knowing wah tthe real rate would be then), so I stick by the prediction of 7.5% by next year (but it could according to some sources go as high as 9% and according to the papers 7.5% would mean a real bloody nose!