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Uk ‘Must Raise Interest Rate This Year’ - Oecd

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http://business.timesonline.co.uk/tol/business/economics/article7136901.ece

The Bank of England must raise interest rates by the end of this year to keep inflation in check, the Organization for Economic Cooperation and Development warned today.

The Bank of England is struggling to curb inflation which is currently 3.7 per cent — far above the Government’s inflation target of 2 per cent.

“The authorities face the challenge of preserving credibility, with headline inflation and some measures of inflation expectations exceeding the targeted rate,” the Paris-based group of 30 developed economies said in its twice-yearly report today.

“The gradual drift up of some measures of inflation expectations implies a need to increase interest rates earlier than previously thought and no later than the last quarter of 2010.”

The interest rate has been at a historic low of 0.5 per cent since March last year.

The Bank of England predicts that the inflation spike will be short lived, as one-off effects such as higher prices for food and for clothing, are gradually outweighed by weak growth and high unemployment, which limit the ability of firms and workers to raise prices and wages.

The Bank’s Governor Mervyn King said earlier this month that inflation was likely to fall back to its 2 per cent target “within a year”, but that inflation had been “somewhat higher than expected over the past year”.

The OECD also called for Britain’s coalition government to push through a credible medium-term plan to cut the country’s record budget deficit or risk driving up inflation and damaging the recovery.

The think tank said that the public deficit — currently 11.1 per cent of GDP — was likely to remain above 10 per cent for 2010-2011, while total national debt was put at 86 per cent for next year.

The economy should grow 1.3 per cent this year and 2.5 per cent in 2011 after shrinking to 4.9 per cent last year, the OECD said.

.........

The OECD said that the “fragile state of the economy should be weighed against the need to maintain [policy] credibility when deciding the initial pace of consolidation, but a concrete and far-reaching consolidation plan needs to be announced upfront”.

Got to love the paradoxes in this, if they cut they'll kill the "recovery" and show the past growth to be illusionary debt expansion. However to continue the debt expansion with more debt risks total collapse.

The catch 22.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

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http://business.timesonline.co.uk/tol/business/economics/article7136901.ece

Got to love the paradoxes in this, if they cut they'll kill the "recovery" and show the past growth to be illusionary debt expansion. However to continue the debt expansion with more debt risks total collapse.

The catch 22.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Holy Mises !

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http://business.time...icle7136901.ece

Got to love the paradoxes in this, if they cut they'll kill the "recovery" and show the past growth to be illusionary debt expansion. However to continue the debt expansion with more debt risks total collapse.

The catch 22.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

That's been my signature for a good couple of years now. wink.gif

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I was in the Nationwide this morning - they have my local paper in there so I nip in for a read when passing - and on the TV they had some chap from the OCED talking, alas the sound was muted, and the banner beneath is was 'OECD calls for UK rate rise soon'.

Anyone know anything about it?

Oh, here is a link just published on the DM site:

http://www.dailymail.co.uk/news/article-1281557/Interest-rates-rise-combat-soaring-inflation-warns-OECD.html?ITO=1490

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actually I would very much say that they do.Alongside cutting personal taxation where possible.

the base rate is a blunt instrument,but it does give a bit of ammunition should things get tight again.

we have just about reached the limit to which the general public will bear what should be a partly corporate burden on their shoulders.

if the corporatisists squeeze any more ther most certainly will be blood on the streets.They've taken the piss out of people once too often so an IRA/Muslim bogeyman isn't going to wash......the finger will be pointed fairly and squarely at those who have been attending WEF etc,and won't be confined to a few hippies with attitude.

greece IMHO is but a warm-up,If the corporations don't change their ways it will become a bloodbath.

and there will not be much point in the CEO's trying to ride it out on their privately bought islands....it'll become a proper grudge match,these guys will be hunted down.

Edited by oracle

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Got to love the paradoxes in this, if they cut they'll kill the "recovery" and show the past growth to be illusionary debt expansion. However to continue the debt expansion with more debt risks total collapse.

Sounds a lot like what's happened in Greece. The BoE is doing the same general thing that the EU politico's have been doing: kicking the problem further into the grass and hoping it goes away. The thing is, all these temporary measues (including 0.5% base rate) can't go on forever (or at least not as long as it's needed) and when the bubble finally pops:

a final and total catastrophe of the currency system

Or the base rate is yanked up to defend it.

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I can't help thinking that the published view of the BOE that inflation will peak soon and then decline rapidly as a reason for not raising rates are just weasel words. I have a sneaking suspicion that they are trying to inflate the debt burden (both public and private) away as far as possible before they absolutely have to act to raise rates. After all the way these debt problems have been solved in the past is to either default or inflate - and I can't see any reason for things to be different this time round.

Low rates would of course make sense if we were deflating but I am very sceptical of the deflationistas argument that we're entering a period of deflation; I'm not saying it can't happen but I'm just not convinced - at least in the UK.

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I can't help thinking that the published view of the BOE that inflation will peak soon and then decline rapidly as a reason for not raising rates are just weasel words.

That'll be you and everyone else then.

When rates first reached 0.5% Mervyn said that (by now) CPI inflation would be 0.7%. In fact that's why the BoE started using QE - to help keep inflation from going negative. Now his argument is that both oil prices and currency devaluation will drop significantly by 2011, even though both of these are linked to the viability of sterling which is in turn linked (to a major extent) to the base rate.

To put it another way, unless IR's go up inflation will run away and from where I'm standing this is what Merv appears to want.

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Or the base rate is yanked up to defend it.

Given the 13 years of over indulgent debt expansion would yanking up the base rate and consequently mortgage rates not bring about an economic collapse which in turn would precipitate the very currency collapse they must avoid? Much as in they either precipitate the collapse or wait for the increased debt expansion to do the job for them. Personally I'd rather they forced the debasement than let the system do the job in a random uncontrolled manner.

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That'll be you and everyone else then.

When rates first reached 0.5% Mervyn said that (by now) CPI inflation would be 0.7%. In fact that's why the BoE started using QE - to help keep inflation from going negative. Now his argument is that both oil prices and currency devaluation will drop significantly by 2011, even though both of these are linked to the viability of sterling which is in turn linked (to a major extent) to the base rate.

To put it another way, unless IR's go up inflation will run away and from where I'm standing this is what Merv appears to want.

and why not ;p HPCers have been saying higher inflation is the easiest way out for years, they just cant say it but we have.

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The days of low interest rates in the UK will come to an end next year if the Bank of England follows the advice of the Organisation for Economic Co-operation and Development (OECD), which has urged the Bank to raise interest rates by three and a half percentage points over the next 18 months.

http://www.livecharts.co.uk/share_prices/news_article/2010-05-26/UK_rates_must_rise_sharply,_OECD_says

partys over - just beginning (delete as appropriate)

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There's a lot of people telling the UK how to run itself these days..... is it a Nation anymore??

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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