1. guiriduro said...

I can't believe the quantity of so-called experts the media is dragging out in order to express their view that interest rates have to drop, obviously trying to create a situation which makes it politically difficult for the MPC to raise them. Mervin King is going to have to write yet another letter, having failed to keep inflation near the 2% target and its edging beyond 4% (on the discredited CPI measure, in reality probably 8% yoy.) The argument against raising rates is that in a normal market that would stifle lending and cause economic damage. What these commentators completely ignore, is that the only available lending at the moment is at a considerably higher interest rate than the BoE base rate anyway. The banks have had their chance to cut rates along with the BoE, and they have failed. Given that many of the inflationary factors are exogenous to the UK economy, the one thing the BoE can do to improve their SOLE remit of inflation control, is to increase rates, which will simultaneously lead to an increase in the value of the pound and a relative decrease in the value of those inflating commodities. It will also help to create a stronger savings culture, so badly needed in the UK. It will probably also lead in the short term, to a faster collapse in the economy, which is going to happen anyway, better that it is sharper and over more quickly so that we can move on.