Wednesday, Feb 13, 2008
And now it is a true basket case
Times: Bank of England Governor, Mervyn King, admits inflation will trigger new Alistair Darling letter
"The prospect of an immediate interest rate cut receded further today as Mervyn King, the Governor of the Bank of England, conceded it was “odds-on” he wouldhave to write an explanatory letter to the Chancellor as inflation heads towards 3 per cent" so let us summarize: no IR cuts, further slowdown, recession, then cuts, then the pound falls to 1.5 against dollar, more inflation, rates go up again, immigration stops, lots of empty city flats. Could all of this been prevented? YEEEEESS! keeping rates up in the first place and regulating BTL mortgage lending. Brown + Darling --> Dustbin of history
Posted by confused76 @ 01:06 PM (1423 views) Add Comment
15 Comments
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1. handle_it said...
Now we're going to get the inevitable chorus of Vi whining.
2. paul said...
Websites down. Can anyone post the contents here?
3. inbreda said...
If inflation rising that much above target was inevitable, what Fing excuse does the BoE use for cutting IRs last month? Gordon Browns fist controlling their movements? Pathetic. We shouldn't give these monkeys the kudos of reading their tripe.
4. jack c said...
The prospect of an immediate interest rate cut receded further today as Mervyn King, the Governor of the Bank of England, conceded it was “odds-on” that he would have to write an explanatory letter to the Chancellor as inflation heads towards 3 per cent. In its quarterly Inflation Report, the Bank said that Consumer Price Index (CPI) inflation — its preferred measure of inflation — would remain above its 2 per cent target in the near term. Inflation is highly likely to spike almost immediately from 2.2 per cent to nearly 2.7 per cent because of the recent rush in energy providers raising gas and electricity bills while rising foods costs could push inflation higher still, towards 3 per cent. Although the Bank said that other factors, such as non-food retail goods prices, which fell by 3.2 per cent last year, would help to offset the contribution to inflation from rising food and energy prices, it conceded that inflation would remain ahead of its target for a period.
Howard Archer, chief UK and European economist at Global Insight, said: "The quarterly Inflation Report indicates that only limited further reductions in interest rates are likely as the Bank of England carries out the very difficult balancing act of containing inflation while trying to support growth." In April last year, Mr King became the first Governor, since the Bank gained independence in 1997, who was forced to write a letter of explanation to the Chancellor, who was Gordon Brown at the time, detailing why CPI inflation had reached 3.1 per cent.
Unveiling the Inflation Report today, Mr King said: “Over the next couple of years, it is odds-on I will have to write another letter. I can’t be entirely sure in which direction. It is rather more likely than not.”
Yesterday, pressure appeared to ease slightly on the Bank of England when it reported that CPI inflation had grown from 2.1 per cent to 2.2 per cent, below a forecast rise to 2.3 per cent.
However, there was inflationary growth elsewhere, with factory gate prices rising by a 16-year high of 5.7 per cent while like-for-like sales in January grew by 2.6 per cent.
After interest rate cuts in December and February, there had been an expectation that the Bank's rate-setting Monetary Policy Committee (MPC) may move to cut rates from 5.25 per cent in April. However, based on the Bank's forecast of a short term spike in inflation, a cut to borrowing costs is now likely to be announced in May.
5. stillthinking said...
Interesting that he doesn't know which direction will cause the letter.
6. hpwatcher said...
''Could all of this been prevented?''
...and it isn't as if these fools didn't spot the boom when it was happening?
7. hpwatcher said...
''“odds-on” he wouldhave to write an explanatory letter to the Chancellor''
why bother? no-one really cares what Darling thinks....lame duck
8. alan said...
I think Mervyn wants to hold rates steady. However, his paymasters want a panic cut. This is not easy to reconcile - virtually anything he says gets lambasted by VIs, bankers etc. There is no longer room for manoeuvre.
Cutting IRs will probably not result in reductions in morgage rates to joe public - look at how much HSBC are now paying on their deposits! They will hardly lend out at lower rates to borrowers below that which they they are forced to pay savers!
Yes, the BTL industry should have been regulated earlier (I saw earlier posts relating to B&B). I think B&B are in a very tricky situation and hoping for a "white knight" to bail them out. Failing that, they will be unable to continue with their business model and will soon become a casualty.
9. Stillrenting said...
Confused76 you're getting as bad as the media you constantly criticise. Far from saying there would be no more IR cuts, King's statement suggests that rates will be cut below their current level of 5.25% but not as low as the 4.5% that some seemed to be expecting.
Like most on this forum I would like to see house prices fall, but I don't understand why some seem to think there is a giant conspiracy against them.
10. Orwell said...
What makes you think that Alan?
11. Fed Up said...
So how long is it going to take for the REAL rate of inflation to fall to 3% and how many rate rises will it require?
12. hpwatcher said...
The government are a house of fools.
How anyone can take anything they say seriously beyond me....so clearly out for themselves.
13. Ash4781 said...
@stillthinking
what would the undershoot letter read like ?
'Rates got to zero.We packed up and went home
Merv'
14. Mikedx said...
I truly blame anybody who has voted for labour in the last 12 years. I also believe the alternatives are just as bad.
But its ok folks! They are shutting a school per day! That'll save some cash.
Also, anybody else noticed that the ads on tv are all for insurance or loans?
15. housing carbuncle said...
Darling and Brown are replicants and need to be retired.