Thursday, Jun 07, 2007
Sit on the hands, boys.
FT.com: BoE keeps interest rates on hold
The Bank of England left interest rates at 5.5 per cent on Thursday, a decision the City believes represents merely a pause in the tightening cycle.
By not increasing the cost of borrowing by a further 25 basis points in June, the Bank’s rate setting body has signalled it is prepared to wait and see how effective previous rate rises have been in cooling inflationary pressures.
Posted by dohousescrashinthewoods @ 12:07 PM (314 views) Add Comment
23 Comments
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1. dohousescrashinthewoods said...
Then again, Brits are already squealing under the pressure of a historically low 5.5%, so may be some wisdom in it.
If only people weren't so hooked on chep credit, maybe they could save the pound?
2. paul said...
The MPC snoozes on behind the wheel, unaware of the inflation juggernaut approaching.
3. Pr said...
I'm embarrased to be British.
4. tipping point said...
The MPC's remit is clear. Encourage debt, support the bubble and lie to the public about tackling inflation.
Never have so few unelected people done so much damage to the United Kingdom.
The pound in my opinion is a sinking ship. Sell now and avoid the rush.
5. mrmickey said...
The BOE are in the nightmare scenario now of trying to avoid deflation in the housing market and at the same time control rising inflation in the general economy. The BOE will fail on both counts there is now no way of avoiding this, expect ten years of asset deflation and at the same time rocketing consumer prices. This is the method now used to transfer wealth in our economy from the middle classes to the super rich who now control our government.
6. talking rot said...
I've said it a few times already but I can not believe interest rates will rise by more then 5.75% this year, especially since some one kindly posted a link to the CPI measure. The MPC is following its instructions to the letter and is doing its best to target inflation at 2% according to the CPI. The fact that the instructions and the CPI measure are not what many believe is appropriate, is irrelevant. The long term damage to the UK economy is likewise irrelveant.
Watch the falls in interest rates in the new year!
7. harold said...
*ankers.
8. Orwell said...
What does Mrs. Flange say?
9. harold said...
What a surprise:
http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/12/default.stm
10. royston said...
I don't accept that there is an upper limit to how high interest rates will go. Two things are certain:
1. The MPC does not want to surprise the markets - so they will try to signal moves in advance.
2. The MPC wants to convey the impression of everything calm and under control - so, it will be small, paced increases - no sudden moves.
11. uncle tom said...
TR - the groundswell of inflationary pressures, coupled to the evaporation of deflationary factors, is going to put a lot of pressure on interest rates. 6% at year-end looks favourite still, with a higher figure much more likely than a lower one. I can see nothing on the distant horizon to suggest that rates could be any lower in '08.
New Zealand has just taken their rate to 8% - using the same inflation targetting model as the UK..
12. dohousescrashinthewoods said...
Housing "affordability" is a combination of wages and interest rates.
Wages are static.
Therefore, if rates go up, prices fall.
The BoE cannot avoid asset price deflation if it has to raise rates.
13. george monsoon said...
One thing is certain, they can't afford to put rates down. I suspected this would happen, but I rather hoped that common sense would prevail and rates would rise another quarter point. Next time definately, when the CPI crosses the 4% barrier.
14. fahrenheit451 said...
I would like to agree that Base Rates will top out at 5.75%, but only if there is a decent threat that they may go up to 6.5% or even higher. Wage inflation will start to kick-in next year and especially with the Olympics sucking up the resources of the Construction Industry, the Construction Price Index will rise, this will knock-on into house building, etc.
Anyone looking to borrow money over the few years would be sensible to guess that the Base Rate could rise to 7%, then if it does its OK, its within the cost plan. Otherwise its back Mr McCawber's very sound financial rules ... one penny overspend ...
15. sold 2 rent 1 said...
As I've said before the big question is not how high rates have to go - 6.0, 6.5, 7.0 7.5 ??
The big question, once the economies start tanking, is will slashing rates work like in 2001-2?
The is NO NO NO.
The level of debt ensures that this bubble will end up in a deflationary depression.
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17. Pr said...
I think its more to do with the level of money growth, which, once deflated, will cause deflation, at least for assets. Commodities could experience some demand destruction, resulting in CPI and RPI reductions, but that would be a secondary effect, in response to a global recession. Remember that, with a global economy, commodities and the price of oil, etc. and goods could remain high if demand continues elsewhere, in China, the East, Russia, Brazil, etc. whilst America and Europe tanker and experience asset class deflation. This is what happened in Japan and it could happen here. It would cause a significant redistribution of weath from the developed to the developing world.
18. Mark Wadsworth said...
"Brits are already squealing under the pressure of a historically low 5.5%" excellent point, can't be made often enough.
19. Orwell said...
I think that it will be 7.5% sorry TR... I know your view and value both the humour you bring top this site and also the careful and prudent analysis ... (you can tell I am a Court lawyer can't you? and your honour I have the utmost respect for my learned friend's analysis of the law (none!) however to the contrary (the man/woman is a low down...) ...
But seriously TR, we need higher IR's and very soon. I am sorry about those who have been misssold mortgages, (and 'insurnace' policies on them that will never pay out), but this will have to be resolved by the regulators...
We need stable prices and stable borrowing and lending ...
We need a government and an economy that has not overborrowed....
We need a stable economy in which I can do business...
Sorry , but my view stands .... 7.5% by next year...
20. talking rot said...
Mrs Flange isn't saying much at the moment. She has the grin of a Cheshire cat as she is thumbing through holiday brochures.
21. japanese uncle said...
It's none but the strategies to eventually realise 10%+ IR, to make the bursting of the bubble even more spectacular, I guess. If the BoE raise IR to 6% at a stroke immediately, inflation can well be contained. But someone wish to see IR soaring two digits.
22. Orwell said...
Where do you get that view from JA?
I doubt 6% is enough now !
23. talking rot said...
JU
Oh how I wish you are right but, sorry, I just can't buy it. I have a sneaking feeling that conspiracy is often mistaken for sheer incompetence.