Wednesday, Dec 12, 2007
Oh god, here we go again....irrational exuberance!!!
Times Online: Bank gets more headroom for rate cuts
These people are bloody determined to stop that bubble from bursting.....
''Slower-than-expected wage increases and record job figures allow Bank of England more room to cut rates
Pressure on the Bank of England to introduce a second cut in interest rates as early as next month increased today as official figures showed average earnings had increased at a slower than expected rate over the past three months.''
Posted by hpwatcher @ 05:22 PM (507 views) Add Comment
7 Comments
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1. paul said...
What of the inflation stats out later this week though?
2. david20040_0 said...
The BoE doesn't care about inflation anymore it just cares about saving housing.
3. paulos said...
The Bank of England (or the Fed) don't care about inflation. They only cared about it when it was a threat that might cause a recession.
Their biggest fear is recession, because recession gets the government voted out (and probably the central bankers out of a job).
Inflation isn't the threat to the economy now, because if house prices keep rising then people keep spending and all is well. Rate cuts *may* keep a recession at bay, so that's the order of the day.
Anyway, the new tool to battle inflation seems to be curtailing public sector pay rises rather than interest rate tweaking.
4. Bystander said...
Some economists are predicting that interest rates could fall to as low as 4 per cent as the Bank strives to keep inflation to its 2 per cent target.
Don't understand the above statement. Surely a drop in the IR causes inflation to rise, and with current inflation at 2.1% a drop from 5.5% IR to 4% IR would cause inflation to sky rocket. Am I missing something?
5. Scottow said...
I hope the BoE have more luck with the next announcement. Interbank rates went up not down.
6. uncle chris said...
I think the BoE/Government are primarily concerned with the City of London maintaining it's so called position in the centre of world finance - stuff the rest of us. Housing is just one area which exposes the fact that the UK economy is built on a mountain of debt, and if they can keep up the illusion of static house prices - the vast wholes on the accounts of many (if not most) city institutions will remain hidden. After all, without the tax revenues coming in from the city, as a country we have nothing to offer the world but a huge debt legacy.
What we will have now is politicians, corporations and economists desperately trying to paper over the cracks, and the UK economy growing less and less stable. It will end in tears, and I suspect the start of it will be a new 'winter of discontent' when people start to wake up to the fact that they are effectively taking pay cuts year on year due to the government fiddling CPI/RPI figures to cover up the real increase in the cost of living. It is quite clear now that Merv is not in control and that the BoE can no longer claim to be independent.
7. happyrenter said...
1/4 point here, liquidity there - these are all technical manoeuvres, sentiment has already taken over the housing market - it is too late to stop the drop, only ease the pain some of the side effects.
Remember it was the same on the way up....