Saturday, May 29, 2010
Politicians will say anything to keep the markets calm - but will they actually do anything?
Telegraph: David Cameron hints at interest rate rise to combat 'worrying' inflation
The Prime Minister has voiced alarm at the level of inflation, issuing a veiled hint that the Bank of England should consider taking action and perhaps even raise interest rates. David Cameron said that the rise in the Consumer Price Index to 3.7pc in April – almost double the Monetary Policy Committee's (MPC) 2pc target – was starting to concern him. "We have seen a slightly worrying increase in inflation in recent months, so interest rates will be set to control inflation," he said. Although the Prime Minister went on to say that "policy [is] set independently by the Bank of England", the comments are likely to be seen as a veiled warning that the Bank should be wary of allowing prices to rise much further.
Posted by drewster @ 04:49 PM (1926 views) Add Comment
12 Comments
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1. alan said...
Well, what is it:
1) Another politician trying to be all things to all people?
or
2) Cameron wanting house prices to drop early (so as to put the blame on Brown)?
I'm thinking that he wants to get all the skeletons out of the closet as fast as possible in order to demonstrate that it was NuLabour that caused all the problems.
2. i remember the 90`s said...
Bring it on ,you guys might get your HPC and savers could get a better rate(me) .
3. gone-to-colombia said...
It´s looking more and more as if the present government wants to lance the boil of over priced property as asap.
4. quiet guy said...
I'm not convinced that the government cares about the house price boom. Intellectually, they know that inflation is a bad thing but when was the last time you saw a mainstream media article with the phrase "house price inflation" in it? I expect to see property prices fall significantly but not as deliberate government policy - quite the opposite in fact.
5. icarus said...
So the director general of the BBC is sticking his oar in. Everybody's a f**king expert these days.
6. fallingbuzzard said...
I think Merv might receive a letter soon.
7. clockslinger said...
icarus @ 5 yes, I've noticed that everybody being an "expert" thing a lot too...some pretty complex theories out there but mostly wrong on this site to date I'm afraid!
For what it's worth (and it isn't worth much) it seems it is a long, slow game this much awaited HPC, and I suspect it will be a lot less remarkable than many believe if it arrives, 'cause it will be a very long term thing and it will not just be the property market that is supine.
8. enuii said...
I don't care about house prices anymore - I just want to pay off the mortgage on the roof over my head then I don't have to work so hard !
I wonder how many people in these so called enlightened days will be paying mortgages when they are technically pensioners!
9. Jpjh said...
The coalition will be perfectly aware they cannot juggle the country for 5 years if they want any chance to return to power in 5 years.
Its going to be swift and immediate pain this year and next. They are doing the right thing but the funny thing is no-one will like it.
They have two years at best to reset the economy, and then start focusing on growth. Its amusing that they think it can be reset in two years given the entire countries over indulgence in "the good life"
10. Redbaron51 said...
Me and my OH came to this country 10 years ago without speaking a word in English (having already graduated at University). We have spent loads learning English and have to do unskilled work at the beginning and have never claimed a single penny from government. We are now (re)-established with our professional careers over here and have been saving for the past 5 or so years. We have a considerable amount to put as deposit, but I just cannot make sense of this non-sense inflated market. We went for a viewing yesterday on a nice 2-bed terraced house in Feltham (West (greater)London). We would probably need to install a combi boiler and do nothing else, just move in. Asking price: £245K, yes 245 grand in Feltham. Believe it or not. Current owners bought house in Oct 2006 for £195K. How on earth people commit to pay such an inflated price is beyond me.
Anyhow, point is: this Tory/coalition govern. should do whatever it takes to bring price in line to affordability. Increase CGT threshold, put up interest rates, etc.
It is just frustrating to still see people desperate to get into the "housing ladder". Depressing
11. Globalisation said...
rates could increase but not if we have a double dip
12. stillthinking said...
Every time Mervyn makes an announcement he does so purely to set expectations, so I don't think that Cameron muddying the water and warning of interest rate rises is going to help. There is a funding gap and a likelihood of deflation.
Could anything be more likely to tip the UK into a savage deflationary recession than setting expectations of higher debt servicing costs immediately prior to a collapse in price levels and wages. Given that high profile money men such as Rogers, "I wouldn't put any money in the UK, its finished", or Gross, "I wouldn't lend any money to the UK government", have hardly increased the amount of investment we need to transition state workers into the private sector, Cameron has foolishly (IMO) raised interest rate expectations at the same time as the even more foolish uncertainty over taxation on any profits realised.
When Cameron says we are standing by to raise, he is saying the UK is on the brink of dramatic decline. Which is true, but not something he should come out with.