Tuesday, Jun 05, 2007
Still on for 5.75% by the end of the year
The Times: Prices grow at slowest rate for 15 months
We'll have to wait for the MPC to decide but there are as many indicies suggesting no reason for a rate rise as there are suggesting rates should rise. With all this uncertainty, the MPC will demonstrate clear and decisive leadership by voting for NO CHANGE and applying its WAIT-AND-SEE policy. I am no expert but I would not be surprised if the CPI basket was weighted towards measuring the cost of services.
Posted by talking rot @ 03:09 PM (133 views) Add Comment
15 Comments
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1. Pr said...
Yer, but petrol is at £1/litre, oil at $70 barrel. Something has to give.
2. paul said...
So the MPC will be able to quaff the swill for another month busy doing anything.
Mind you, the last time they did this, inflation jumped to 3.1% and jolted them out of their fattened stupor.
Keep watching here http://www.statistics.gov.uk/cci/nugget.asp?id=19, because the inflationary trend is still sharply upward despite their statistical juggling shenanigans.
3. Gilbert said...
Details of the 'CPI basket' and weightings
http://www.statistics.gov.uk/elmr/04_07/downloads/ELMR_April07_Wingfield.pdf
4. Orwell said...
They may of course go for 0.5% in August when people are away and everything is shut down inc city factories Courts etc..
5. mrmickey said...
Goodbye Sterling it's been nice knowing you hello Euro.
6. confused76 said...
There are enough signs in the market that the MPC may raise interest rates again this week. I think it will be a very close call:
- The dollar / pound rate went up yesterday and again today
U.K. Pound Gains on Speculation BOE Will Raise Rates This Week
http://www.bloomberg.com/apps/news?pid=20601083&sid=aMJWBboXUvwc&refer=currency
- The swap variable / fixed interest rate went up
Cheap fixed-rate mortgages disappear
"Swap rates, which reflect the City’s view of future interest rates, and determine how much banks and building societies have to pay to fund fixed rate loans, have been rising, explaining why lenders are increasing their rates. Two-year swaps are at 6.15 per cent, their highest level for seven years."
http://business.timesonline.co.uk/tol/business/money/mortgages/article1887707.ece
7. sold 2 rent 1 said...
I tried to post this graph in a previous thread but it messed up.
Hopefully this will be ok.
Looks like the HPI will break down soon
8. confused76 said...
A sensible comment: a small rate shock now to avoid a long battle with inflation later... i think it is a credible approach, particularly because it would go against the mainstream opinion (only 10% of economists predict a rise)
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/05/ccom05.xml#3
9. royston said...
Interest rates should go up. There is too much money sloshing about the global economy. There is no incentive to save and no disincentive either to spend on consumables or to invest in assets. All three are problems right now. All three problems can be solved with higher interest rates. That is not just my opinion. Eminent economists like Tim Congdon and Martin Weale have been making these arguments. International institutions the World Bank, IMF and OECD have taken similar swipes at the current UK inflation policy.
I know he is not in sole control, but how Mervyn King can show his face to other economists is beyond me. If I were in his shoes, I would be looking for a quiet space and a small Japanese knife!
10. tipping point said...
Does anyone remember when the Times was a quality paper!!! You’re more likely to get solid financial advice from a time-share salesman than this agenda pushing pulp.
11. Cstanhope said...
Interest Rates will be CUT that's right CUT down to 5% by the end of the year for the soft landing. They DO NOT need to CUT Rates they can just keep them low and ignore inflation indefinitely which is what they will do.
The UK Housing Market is a special case and will not suffer any crash due to the fact that it is based on stable and solid fundementals such as unlimited immigration and an understanding that the Government will bail out the market if worst comes to worst.
12. Pelethar said...
I reckon they will leave them on hold, by around 7-2 or thereabouts. There will be some dissenting voices on the MPC but in the end they aren't going to want to annoy Gordon on his way into No 10. They will go to 5.75% in July or more likely August, then - with flat or negative HPI and a debt-fuelled economy teetering on the edge - will be at a crossroads: keep to their remit and increase IR to 6-7% and keep inflation in check, or (as openly advocated by the appalling Blanchflower) slash rates, destroy sterling, and get more debt-driven money sloshing around the economy.
13. talking rot said...
Gilbert
Ta. Very useful indeed. I can not understand why the weighting given for food has been declining over the years. Are we eating less? Also, why is the weighting for restaurants and eating out higher then that for food?
Some bizarre reasons behind this no doubt.
14. Pr said...
The MPC know that prices will fall in the short term, that is not new news, the issue is pipeline pressures that may stop them meeting the target in 1-3yrs. Oil is one of those, which takes a long while to feed through to higher utility and factory output prices. They expected oil to fall to $40/barrel and probably think this recent rise is temporary too. They will be spooked when it isn't. For more about oil see the extremely cerebral blog on peak oil see www.theoildrum.com .
15. Blindleadtheblind said...
Rates will go up, its not important if now or later but my guess is BoE will follow the markets and raise this month. As for the Euro comment I would be very very carefull given the problems with Spain and their precarious financial position. The rubber band of connected world markets is getting stretched mighty tightly, when it snaps....