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Bank Of England Member Votes Again For Bank Rate Rise

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http://www.bbc.co.uk/news/business-10710736

A member of the Bank of England's Monetary Policy Committee (MPC) has called again for a rise in interest rates.

Minutes from the MPC's July meeting show Andrew Sentance voted to lift the Bank rate to 0.75% from the record low of 0.5%, citing stubborn inflation.

It is the second month in a row that Mr Sentance has called for a rate rise.

The other MPC members at the meeting all voted for rates to be held at 0.5% for the 16th month in a row.

Although the most recent consumer price inflation figure for June - at 3.2% - remains above the Bank's target rate of 2%, the majority of committee members thought that the slow pace of economic growth would hold back prices.

The minutes from the meeting noted that uncertainty over tax and spending plans in the run-up to the coalition government's emergency Budget, which was produced in late June, may have had an impact on business confidence and made the economic situation temporarily more difficult to read.

David Kern, the chief economist at business lobby group the British Chambers of Commerce, said the committee's job was particularly tricky given the current economic backdrop.

He said: "The minutes state that short-term growth prospects for the economy have weakened, while short-term inflationary risks are greater than previously indicated.

"This is an unfortunate combination of circumstances that makes the choices facing the MPC more difficult."

Most analysts polled by the Reuters news agency thought that the minutes suggested there would be no rise in interest rates until some time in 2011.

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This is the start. Interest rates will rise.... first it will be one vote.... then two.... then a small rise.... then a bigger rise.... all backed up by puff from the "experts".

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For a rare change, the other 'idiots' are correct. We are in deflation. They may raise the rate this year - but it will be a mistake - and it will come straight back down again. You cannot raise rates in a Depression.

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For a rare change, the other 'idiots' are correct. We are in deflation. They may raise the rate this year - but it will be a mistake - and it will come straight back down again. You cannot raise rates in a Depression.

Even if they don't raise rates any time soon we will still see a HPC. I've always said we don't need higher base rates, it would be nice and speed things up a lot but not essential.

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For a rare change, the other 'idiots' are correct. We are in deflation. They may raise the rate this year - but it will be a mistake - and it will come straight back down again. You cannot raise rates in a Depression.

Agreed. They have been wrong many times but it's deflation that presents a bigger danger in the medium-long term.

It won't make a difference to HPC - it's still happening. It'll just take longer for current debt to be paid off.

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I used to think rates would rise about now 2nd or 3rd quarter this year as I don't believe that there is enough spare capacity to take up the slack. I think the MPC are realising this. Now I think the austerity measures will dampen demand enough to keep inflation under control on it's own combined with 'unexpected' lower growth.

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They'll put off raising interest rates as long as humanly possible, then wait "a bit longer".

At times it feels as if nothing short of high explosives will get the MPC out of its entrenched position.

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For a rare change, the other 'idiots' are correct. We are in deflation. They may raise the rate this year - but it will be a mistake - and it will come straight back down again. You cannot raise rates in a Depression.

I don't call CPI of 3.4% and RPI of 5.1% "deflation". I call it inflation. In Switzerland (for example) 5.1% inflation is what they would have over a decade, not a year!

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I don't call CPI of 3.4% and RPI of 5.1% "deflation". I call it inflation. In Switzerland (for example) 5.1% inflation is what they would have over a decade, not a year!

+1

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They'll put off raising interest rates as long as humanly possible, then wait "a bit longer".

At times it feels as if nothing short of high explosives will get the MPC out of its entrenched position.

You quite clearly haven't seen the BoE's incredibly precise fan chart that tells you all you need to know about where they think inflation is heading...

cpimktmay10large.gif

:blink:

post-278-12797870453098_thumb.gif

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I don't call CPI of 3.4% and RPI of 5.1% "deflation". I call it inflation. In Switzerland (for example) 5.1% inflation is what they would have over a decade, not a year!

+1, the scare of deflation is what they use to inflict us with further inflation, constantly eroding the value of our salaries and our savings.

Edited by wise_eagle

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http://www.bbc.co.uk/news/business-10710736

A member of the Bank of England's Monetary Policy Committee (MPC) has called again for a rise in interest rates.

Minutes from the MPC's July meeting show Andrew Sentance voted to lift the Bank rate to 0.75% from the record low of 0.5%, citing stubborn inflation.

It is the second month in a row that Mr Sentance has called for a rate rise.

The other MPC members at the meeting all voted for rates to be held at 0.5% for the 16th month in a row.

Although the most recent consumer price inflation figure for June - at 3.2% - remains above the Bank's target rate of 2%, the majority of committee members thought that the slow pace of economic growth would hold back prices.

The minutes from the meeting noted that uncertainty over tax and spending plans in the run-up to the coalition government's emergency Budget, which was produced in late June, may have had an impact on business confidence and made the economic situation temporarily more difficult to read.

David Kern, the chief economist at business lobby group the British Chambers of Commerce, said the committee's job was particularly tricky given the current economic backdrop.

He said: "The minutes state that short-term growth prospects for the economy have weakened, while short-term inflationary risks are greater than previously indicated.

"This is an unfortunate combination of circumstances that makes the choices facing the MPC more difficult."

Most analysts polled by the Reuters news agency thought that the minutes suggested there would be no rise in interest rates until some time in 2011.

Far from being idiots I think they are very sensible..... the economy is weak, raise rates and it gets worse, the debt grows, the pound weakens, stuff we import costs more and guess what you get higher inflation.... raising rates is not a solution to anything especially as BOE rates have decoupled from lending rates.

The bank I think would raise rates if they thought the inflation was consumption led, actually it isn't it.

I have long held the view that rates will be low low for ages and ages. The bank might nudge rates up 0.25% here or there in the next couple of years but any change is likely to be very very slow while the economic recovery ( such that it is) remains very weak...... it really wouldn't surprise me if we don't have a rise until spring 2011 and then only 0.25% and then wait until post summer for the next rise or a track back depending on the effect of the first one.

Also anyone hoping that rate rise will feed through into mortgage costs I really believe are howling at the moon... with profitability and margins sky high I think all we'll see from the banks in that sitauion is greater competion and lower margins. It wouldn't surprise me if the BOE rate moved up a full 1% but that mortgage costs stayed broadly flat ( for new borrowers and remortgages).

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Also anyone hoping that rate rise will feed through into mortgage costs I really believe are howling at the moon... with profitability and margins sky high I think all we'll see from the banks in that sitauion is greater competion and lower margins. It wouldn't surprise me if the BOE rate moved up a full 1% but that mortgage costs stayed broadly flat ( for new borrowers and remortgages).

Hoe did you work that out? Margins are high because mortgage lending is risky and low profit. They need to claw back the losses they have made and are still making in regards to mortgages. If base rates rise there is no way the banks would just take hit to profits. It would be passed on immediatly or even pre emtively if it was clear that a rise was imminent.

It's savers who will not benefit from a rate rise.

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This might be naieve of me but....

Inflation is high now, so why not raise IRs now?

If subsequently we get deflation (and I mean negative figures, not just below 2% target), then lower IRs again.

If they can't react to the situation of the moment what's the point of them meeting to discuss it every month. If they're truely looking at the long term figures then why not meet every quarter or every 6 months?

Besides which, as one of the MPC was quoted as saying in another thread, inflation has been above target for 41 of the past 50 months with a long term average of 3.1% (if I remember correctly from the other thread), so if we do get deflation for a bit so what?

Again I might be being naieve, but if cheaper houses are a good thing (which I think most on here would agree on) why the horror at the though of cheaper clothes and food too?

I'm probably missing the hidden dangers of deflation, but surely in the short term at least (say in the time it took for the MPC to react) it wouldn't be so bad, particularly as I've already said when inflation has been relatively high in recent years.

Please feel free to destroy my argument. :)

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For a rare change, the other 'idiots' are correct. We are in deflation. They may raise the rate this year - but it will be a mistake - and it will come straight back down again. You cannot raise rates in a Depression.

quite.

it always astounds me that people believe interest comes out of thin air!

if they raise rates, saving rates will still stay rock bottom and bank will pocket the difference.

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quite.

it always astounds me that people believe interest comes out of thin air!

if they raise rates, saving rates will still stay rock bottom and bank will pocket the difference.

But we've got inflation now, so why not raise rates now? Yes, banks will probably keep saving rates the same, but that's not the point, the point is to control inflation that is here now, surely?

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Far from being idiots I think they are very sensible..... the economy is weak, raise rates and it gets worse, the debt grows, the pound weakens, stuff we import costs more and guess what you get higher inflation.... raising rates is not a solution to anything especially as BOE rates have decoupled from lending rates.

Im afraid you are talking ****** there - if rates go up the pound would strength and imports would get cheaper.

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But we've got inflation now, so why not raise rates now? Yes, banks will probably keep saving rates the same, but that's not the point, the point is to control inflation that is here now, surely?

The banks of englands excuse is that it takes 6 months for these interest rate hikes to feed through to the economy, so they are not adjusting interest rates for todays inflation, rather than the inflation that they are predicting in 6 months time. This means they can make it up as they go along. Or they are just stupid. Or both.

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The banks of englands excuse is that it takes 6 months for these interest rate hikes to feed through to the economy, so they are not adjusting interest rates for todays inflation, rather than the inflation that they are predicting in 6 months time. This means they can make it up as they go along. Or they are just stupid. Or both.

But they've been using the 'This current inflation is a blip' line for about 5 years!

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Given that annualised CPI (and before that RPIx until Gordon ditched it to make inflation look lower) is the government sponsored official inflation metric, what is the longer term record on inflation?

i.e. How much time has the annual CPI or RPIx figure spent in the negative zone over the last 20 years?

Does anyone believe that we'll be seeing persistent negative CPI or RPIx in the coming years?

AFAIK the only thing close to 'persistent' deflation in recent times was a 4 month sustained fall in late 2008. The government immediately fought this deadly deflation by .... lowering VAT <_< (which of course was inherently deflationary). Not to worry though as the monthly CPI went positive again in 2009 despite the VAT rate cut. God forbid that the cost of living might actually fall.

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But we've got inflation now, so why not raise rates now? Yes, banks will probably keep saving rates the same, but that's not the point, the point is to control inflation that is here now, surely?

sometimes inflation is unavoidable. if they raise rates now it'll destroy the economy, crash output which will in turn crash the pound.

there is nothing to be done about the pound getting weaker. its been overvalued for arguably 40 years and the piper must now be paid.

don't forget that for an interest rate to work to control inflation, someone actually has to be able to afford to pay the interest! Otherwise they all go bust and the pound tanks anyway.

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But we've got inflation now, so why not raise rates now? Yes, banks will probably keep saving rates the same, but that's not the point, the point is to control inflation that is here now, surely?

You're looking in the wrong place. Forget what ONS, Bank of England, Treasury tell you.

US is in deflation. Baltic Dry Index (cost of shipping goods) has sunk as low as March 2009. Oil is falling. HAs been close to $90 and now well under $80 and falling.

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sometimes inflation is unavoidable. if they raise rates now it'll destroy the economy, crash output which will in turn crash the pound.

there is nothing to be done about the pound getting weaker. its been overvalued for arguably 40 years and the piper must now be paid.

don't forget that for an interest rate to work to control inflation, someone actually has to be able to afford to pay the interest! Otherwise they all go bust and the pound tanks anyway.

These are the same arguments that have been used for the last 10 years. In 2005 they cut when they should have at least held (if not raised) the rates and have since admitted that this was the wrong course of action and (as a lot of people on here predicted at the time) actually contributed to getting us to where we are today!

As I say why not raise in the short term and then cut again if/when it becomes a problem in order to combat the current problem which is inflation?

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These are the same arguments that have been used for the last 10 years. In 2005 they cut when they should have at least held (if not raised) the rates and have since admitted that this was the wrong course of action and (as a lot of people on here predicted at the time) actually contributed to getting us to where we are today!

As I say why not raise in the short term and then cut again if/when it becomes a problem in order to combat the current problem which is inflation?

if they raise rates now, the interbank rate will simply remain below the base rates, because banks will be left with a surfeit of liquidity.

a base rate rise which is unsustainable will not be passed onto savers because as the economy crashes and their assets go bad banks will look after themselves.

I ask you again, from what is interest manufactured?

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  • 258 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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