Wednesday, Jan 23, 2008
No more swervin
Times: My hands are tied, says Bank Governor Mervyn King, as he braces UK for downturn
In a grim assessment of the economy, Mervyn King says that the UK could endure a "possibly quite sharp" slowdown this year.
“In 2008 it is likely that a less buoyant housing market will go hand in hand with slower growth of consumer spending. In the short run, that will slow economic activity, possibly quite sharply.”
Posted by doomwatch @ 09:42 AM (474 views) Add Comment
6 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. rickyb said...
I notice that the B of E are always happy to take praise when they appear to have inflation under control, but when inflation starts to rise it is always due to factors outside their control, such as energy prices or food prices. It's convenient to blame these external factors, but in reality the seeds of our current inflationary problems were sown several years ago when the money supply was allowed to inflate too rapidly.
2. confused76 said...
King said one very serious thing:
“We have little control over the strength of the economic winds buffeting our economy. We cannot avoid some volatility in the short run and it is important that everyone understands the limits to the ability of central banks to smooth the economy."
So the BoE cannot prevent the slow down and a house price crash:
"His acceptance that the tightening of borrowing conditions imposed by lenders “is unlikely to be short-lived” will be seen as confirmation that a further quarter-point cut in base rates next month remained very likely. (Yeah, so what!)
However, his tough stance on inflationary risks dampened prospects for aggressive cuts this year and quashed hopes that the Bank might follow the dramatic cut in interest rates made by the US Federal Reserve. (Since lowering rates cannot do any good, why to lower and risk inflation?)
Mr King said that inflation was being fuelled by the 10 per cent drop in the value of the pound since August, boosting import bills.
He said: “2008 is likely to see higher energy prices, higher food prices and, with a lower exchange rate, higher import prices, pushing inflation above 2 per cent."
3. little professor said...
Merv made it clear he isn't bothered about inflation anymore in his speech yesterday:
"It is possible that inflation could rise to the level at which I would need to write an open letter of explanation, possibly more than one to the Chancellor," he said.
"Although there is little we can do now to avoid some rise in inflation this year, the task of the Monetary Policy Committee is to ensure that it is short-lived," said King.
http://www.afxnews.com/about488/index.php?lg=en&c=00.00&story=2276705
4. bystander said...
Mervyn King- "2008 is likely to see higher energy prices, higher food prices and, with a lower exchange rate, higher import prices, pushing inflation above 2 per cent."
It is already well above 2%, does this man not buy food, drive a car, heat his house etc. OR is he on such a massive remuneration package that these hikes in prices will not affect him or his MPC mates??? Playing patsy with the markets is going to cause inflation, the like of which will mean drastic raising in IR's by the end of 2008. As I wrote in a previous post - in the January press conference, Crash and Darling emphasised that they wanted inflation at below 2% by the end of 2008 and inferred that between then and now it doesn't matter what happens to the inflation figures, as long as the housing market and the financial markets are looked after. Dangerous games played by desperate players, run away inflation will mean raising interest rates well above the current levels well into 2009/2010.
5. Will said...
http://www.statistics.gov.uk/articles/nojournal/CPI&RPI_basket_2007.pdf
To anyone, as clearly I am missing these obvious signs that CPI is "well above 2%", point out what part of the basket is wrong?
What part doesn't reflect an average consumer? Please make a case that doesn't sound like the Daily Express saying: "cut rates now".
And that excludes "taxes and houses", as it doesn't take much to understand why these are not involved in CPI.
6. submedia said...
I thought Mr King gave a good speech and was very hawkish. I got a sense that inflation is the priority and he is not prepared to slash interest rates as some people want because he understands that the system has got to sort it out themselves. An interest rate cut will probably happen next month as everyone expects but that doesn't mean many will follow. All in all I was encouraged by what he said and don't feel he personally will be influenced by property (he has been saying a crash on the cards for a long time) nor the stock market.
The corporate investors are going to dump some stock and drive the index down and scream for a larger rate cut in the hope that the BoE bulk. I hope they don't.