Tuesday, Oct 09, 2007
Hopes of an early rate cut? If I were them I'd be offloading assets now before rates hit 7%!
The Times: Hopes of early rates cut hurt by rising inflationary pressure
The fact is that inflation will rise above 3% by the New Year or at least Easter, as it did last year if this trend continues (is there any credible reason why it wont?), and, as with last year we would need about another percentage on interest rates to make it budge. This is partly due to global factors, but allowing RPI to migrate two percentage points above CPI is the real reason to be worried because of second round wage led inflation, which is already kicking in with the Royal Mail who have rejected a 7% pay deal over two years. They know that they are being ripped off by high inflation and so will everybody else soon enough. Then there's only way forward and that will be backwards into recession and a house price meltdown.
Posted by planning4acrash @ 12:26 AM (370 views) Add Comment
4 Comments
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1. David Smith's Sub Prime. . . said...
P4C:
Are you still thinking that rates may hit 7% ?
2. C'mon Correction said...
My view has always been the next view is up unless we're in a clear recession or a HPC has started. I still think we'll have another rate rise by Feb '08, there is simply too much money swilling around still.
3. planning4acrash said...
Rates will go up if inflation goes back to 3% CPI, and by that time just one rise will not be enough. I think that scenario certain. Talking Rot has some good points and suggests cuts in the New Year, but I reckon that inflation is totally untamed and take a different viewpoint. The truth? We'll see in good time.
4. dohousescrashinthewoods said...
I think everything is out of control - inflation is out of the bag, HPC is baked in, growth is falling and consumers will stop spending. Chuck in peak oil and I would advise anyone taking a long-term view to learn how to farm an allotment for food!
Mad? Maybe not.
The Broonster has killed the golden goose, cooked the turkey and over-egged the stability porkie pie. I think the West has been accelerating off the edge of the cliff for a long time. The "event horizon" passed ages ago, so there is no way back, only trying to climb an increasingly steep wall of debt, propping it up until everything bursts.
It's the good old "power law" - if something doubles every minute, it looks fine and cottrollable to start with and you get complacent, but if you think about it, when it is only half way to the edge, you have only one minute before it goes over. A bit like the Titanic - three hours of hanging around and then, suddenly, gone. Expect to see a variety of stats accelerate away - reposessions, rice falls, inflation, company failures, bank runs. If someone tells you next year's figures will "moderate" from this year's figures, try to consider what would happen if this year's figures in fact doubled.
Bit of a ramble, but I sense this is our situation. If the economy founders, inflation rockets and Sterling drops all at the same time, what's a bank to do? Will the Gordie Mc Broon even make it past Easter? Tony is well out of it, but I think his multi-million-pound pad may suffer badly in the crash.