Tuesday, Jan 22, 2008
Phew...Mervyn hasn't blinked yet!
Sky News: Spend Less, Save More Warns Bank Boss
The head of the Bank of England has warned that the next year will pose the greatest economic challenge to the UK for a decade, after another day of turmoil on the international markets. Mervyn King said UK economic growth could slow "quite sharply" in the near term. Any hopes of a similar emergency move in Britain were quickly ruled out by the Bank of England, which said it had no plans to bring forward next month's meeting of the Monetary Policy Committee, which sets UK interest rates.
Posted by alan @ 09:54 PM (1131 views) Add Comment
19 Comments
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1. Renterabroad said...
Re. earlier posting (now just gone off the site) "Fed Rate Cut: Victory or Defeat?" - have read the economists comments unde ' "Positive" and "Negative" groupings - the content in the former all tended to fit rather better under the heading of the latter!
2. japanese uncle said...
Saying is one thing, doing another. Why didn't he raise IR but cut it in 2005 in the midst of the emergence of obvious housing bubble? A sly fox albeit a bit fat one.
3. Landedgentry said...
No I want to borrow and spend more.
4. quiet guy said...
@japanese uncle
You are right but a lot of people were calling the top of the market back then - not just King. As I recall, King hs expressed some regret at the house price resurgence in 2005. I'd rather have a chancellor who says things like "Spend Less, Save More" than a house price cheerleader any day.
Whatever his past mistakes, the fact that he is stating some hard truths instead of blustering about how well placed we are to survive international turmoil.
The real test will be when we have year-on-year, undeniable house price falls; then we'll see what he's made of.
5. Cheekie Charlie said...
"next year will pose the greatest economic challenge to the UK for a decade"
So thats 2009 fooked as well.
6. drewster said...
Save more, spend less??! But then our consumer-centric services economy will flounder!
7. Adrian said...
Unless of course Darling and Brown start to put pressure on them to drop interest rates, because we know how independent the BoE really are.
8. uncle tom said...
It's worth going to the BOE site and downloading the full text of the speech.
Notable is the expectation that consumer lending criteria will continue to tighten this year. In other words, mortgage rates will increase regardless of what the MPC does, and LTV terms will tighten. The consequences for those coming off mortgage fixes are all too obvious.
The determination to stick with inflation targetting is interesting - I wondered if he might start positioning to back peddle on that front, but there wasn't a hint.
Looks like our Merv wants to polish his place in history and not try to apologise for the government - good for him!
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11. speculatorone said...
I listened to Murv on the radio this morning. I did think that Darling and Brown can not have been briefed on his speach. Can you see that pair letting him do what he wants or should be doing?
It will be interesting to see how the markets react to the speach.
12. Fence said...
"speculatorone said..."
It's OK now, he just got his contract renewed!
13. new user 2007 said...
If I was cynical I would say he is purposely sounding hawkish about private and government spending, and showing his concerns about inflation verbally….this means he is in an odd way priming us for a rate cut i.e. he wants People to think he is strong on inflation so wage growth does not go out of control BUT then reduce rates to help Markets. In other words, he is aiming these words at Consumers but actually plans to help Markets soon.
14. bystander said...
How can you save more when inflation is making everyday living costs much higher and tha banks are not passing on the rate cuts to borrowers, but cutting savings rates? What incentive is there to save?
15. geed said...
bystander; Precisely, save more while the interest rates are becoming lower and REAL Inflation is pounding away at your savings, I've been saving for the last 8 years and have been hoping for asset values to plummet.
16. geed said...
And another thing, in his speech he said we should expect above target inflation in the short term, i.e... we are going to cut rates and let inflation fly for a while.
17. d'oh said...
JU - it should be remembered that in 2005 Mervyn King did not vote for the rate cut - he was outvoted by his committee.
18. Agentimmo said...
Bystander. Most of the public can save more. Give up one of their 2 foreign holidays per year. Cancel SKY subs. Don't renew car every 2-3 years. Eat out only once a month. Don't buy the latest high-tech gizmos. Do any 2 of these and you can save a bundle. Not too difficult, is it ?
19. Colutd1 said...
how do you save please. in a bank? are they not bankrupt. so u print at 10% a year i get 5% . in the stock market. oh yep that looks all to high even now.. so want to give me no interest but want me to save . then there is the pound going down more than 5% in a year while i get 5%. sust it . i meant to buy some bricks . GOOD OLD BRICKS AND MORTAR. NO OFFENCE ID RATHER BE WITH ALL THE RICKS AND SNORTERS . do not worry they will cut rates even more , feel sorry for people with one house , but the rest of you ,aleric the bold stormed rome in the 3rd century . normal people get a year or 2 s worth of food in the cupboard. at least you can barta with it