Friday, Mar 13, 2009
"interest rates could rise rapidly to counter inflation"
Citywire: Sharp rate rises ahead, MPC member hints
A member of the Bank of England's Monetary Policy Committee has said interest rates could rise rapidly to counter inflation when the current downturn is dealt with. Delivering a speech last night discussing stability and monetary policy, Kate Barker said she was aware that – having cut interest rates drastically to 0.5% and introduced quantitative easing to combat flagging growth and the risk of deflation – sharp rises could be on the cards further down the line. She said: 'I recognise that at some point this stimulus may need to be unwound, possibly rapidly, to avoid an overshooting of inflation.'
Posted by jack c @ 04:28 PM (2430 views) Add Comment
18 Comments
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1. Iron Condor said...
Talk is cheap. Judge these BSers by their actions not their words.
2. paul said...
Believe it when I see it.
3. mark wadsworth said...
Yeah right.
4. doggett said...
"Kate Barker, one of the nine people who set interest rates each month, said it was "not immediately obvious" why recent developments should provide a "trigger which significantly alters expectations of continued robust house price growth"." (October 24 2007)
5. uncle tom said...
We'll get inflation, and sharp interest rate rises, but not the growth..
6. crunchy said...
Brown and inflation. Oil and water.
7. bidin'matime said...
Is it a case of 'No return to bust and boom...'?
8. alan said...
Maybe Kate could be right? I think interest rates may need to be hiked when the UK nears bankruptcy. We could have a run on the pound. This response will be a rapid knee jerk reaction from a failed group of muppets.
Just when all the people have rushed in to take their allocation of RBS mortgages at 3.4% the rates will rocket up, catching them out. Brilliant!
9. Affordablehousing said...
Kate Barker said "Interest rates could rise rapidly to counter inflation when the current downturn is dealt with".
"when the current downturn is dealt with".
Trouble is my deary, this recession we are in looks like it will turn into an economic depression that may well last a decade,
so the current downturn will not get delt with for a long long time yet!.
And anyway, the Monetary Policy Committee couldn't 'deal' with a bad case of dandruff, that's partly why the UK is in such a mess!.
10. Mrb said...
Pesto mentioned Ricardo's Equivalence theory 2 days ago. Perhaps this validates peoples new found frugality.
11. hope_i_survive said...
I would have thought it was after the Election was the plan, but Crash Gordon is going to loss in a big way because he is hurting the grey pound and they are the only ones who can be bothered to vote.
12. stillthinking said...
The only reason she is saying this is because the pound has fallen with the impact of QE i.e. nobody believes that the economy is going to turn around, nobody believes that inflation will be reined in later but everybody believes that the UK is tanking. The point of QE is to stimulate demand, but unfortunately already it has the effect of destroying faith in the currency itself.
The only demand being stimulated is for foreign currencies.
@hope_i_survive, GB is hurting the private sector private pension grey pound, who won't vote for him anyway. The balwark of his support is the state sector ( and net social security winners ), who will only be affected when the game is truly up. Probably this should be "has hurt/killed" given the chances of a pension turnaround.
13. The Baldman said...
STAGFLATION here we come!
14. crunchy said...
8. alan said...Just when all the people have rushed in to take their allocation of RBS mortgages at 3.4% the rates will rocket up, catching them out. Brilliant!
Yep! you spotted the con. House prices heading down interest rates heading up. Interesting!
15. Bensassoon said...
QE will put downwards pressure on the pound for a sustained period. This will bid up imported goods. While the economies around the world move away from full employment, output of goods and services will fall resulting in less excesses in these markets. The result of a weaker pound and less excess of goods is likely to put upwards pressure on UK inflation. With the BoE targeting inflation, they will have no option but to hike rates to control this. I expect this to take at least a year to have any impact on inflation as for now there are still excesses in the product markets and this will be a key factor in bringing back inflation.
16. This comment has been removed as it was found to be in breach of our Blog Policies.
17. sirgoogle said...
Crunchy - very true - just like 1988-1992
If you have not see this - enjoy !!
http://www.youtube.com/watch?v=4KnApSVmWRk&feature=PlayList&p=9F86821DBFE766C5&playnext=1&playnext_from=PL&index=34
18. crunchy said...
14. sirgoogle, Thanks.
GORDON WAS A MORON, fingers crossed!