Friday, Jan 18, 2008
Forget rate cuts, says Sir John
Times: Sir John Gieve makes case for rate cut as MPC faces inflation test
The Bank of England's Deputy Governor dampened hopes of aggressive cuts in interest rates to bolster the economy yesterday as he highlighted its increasingly acute dilemma over a likely “sharp rise” in inflation, even as growth falters.
Posted by confused76 @ 07:46 AM (382 views) Add Comment
4 Comments
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1. hpwatcher said...
There isn't even a case for non-aggressive rate cuts. There is, in my view, only a case for rate rises.
2. bystander said...
Started early haven't we Sir John Gieve.
What a surprise that the ultra capitalist should be looking out for his mates in retail (Next, DSG and M&S - flawed business plans and projections) and property, rather than looking at the wider economic fallout from 'sharply' increasing inflation. The comments below this article make strong points - why should anyone save if their savings will be made worthless with high inflation? Pensions based and lost on speculation and gambling, rather than careful thrift (this does not imply not spending) will be one of the legacies of this disastrous government. Rates need to be held (raising could do more harm than good, as lenders will definitely add these increases to the cost of borrowing, whereas there are absolutely no guarantees that they will lower lending costs in line with projected rate drops - they are looking out for themselves now and nothing the Government, oops, the BoE can do will change this). The economy will slow and bring inflation down with it, but to drop rates and let inflation rise is fiscal madness. The pound needs to reach its plateau and where it is now is as good a place as any.
3. paul said...
The more they cut rates, the more they stoke inflation.
Basic economics textbook stuff ...
4. eyeoftheweasel said...
I agree with what you're saying Bystander. My gut feeling is that rates are about right as they are, and although I'd have preferred that the last cut hadn't happened, I think tweaking rates either up or down now is likely to encourage speculation and uncertainty about what's going to happen next. I certainly think cutting the rates any further is likely to have a very detrimental effect on inflation and the value of the pound.
Wish I had the figures to back up my gut.