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And the much stronger than expected performance is also likely to increase the pressure on the Bank of England's Monetary Policy Committee (MPC) for a rise in interest rates from their record low 0.5 per cent.

Please can someone explain to me, a recent novice to economics, why an increase in GDP warants a rise in interest rates? Genuine question.

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Please can someone explain to me, a recent novice to economics, why an increase in GDP warants a rise in interest rates? Genuine question.

The increase in GDP means either that there is more money in the economy, or it is circulating faster or both.

Leave this untouched and an inflationary spiral may develop.

Putting up interest rates makes people want to hold on to their money and less likely to borrow more into existance.

Other explanations are available.

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No chance of a rate rise. Remember back to the formation of the coalition and it emerged that Vince, George and Merv had been having nice cosy chats about cuts and policy and Vince had a damascene converstion to cuts now from his previous stance almost overnight.

A deal has been done between the coalition and the BoE and it is the BoE keeps it policy loose i.e .5% interest rates and liquidity schemes and the Govt will take inflation out of the system by cuts and tax rises.

If the economy keeps growing strongly I think you will see VAT used as the tool to cool it down I would expect Osbourne to rise in stages another 1% on VAT in the Autum then 1% Jan and then the final .5% end of the tax year as opposed to one hit next april. Also he would cut deeper quicker because the private sector would pick up the people being made redundant in the public sector faster.

BoE rate at .5% to 1% for at least the next 2 years and maybe for 4 to 5.

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Do you think they read this forum for their ideas? From th GDP thread:

Seriously though if we have recover from recession too fast we will se soaring inflation (even more soaring than now!) and this figure shows that the outlook for medium term inflation could now be much higher than expected. Also now there is no danger of slipping back into negative growth a gradual easing of monetry policy would be appropriate? Maybe Sentance was right after all?

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No chance of a rate rise. Remember back to the formation of the coalition and it emerged that Vince, George and Merv had been having nice cosy chats about cuts and policy and Vince had a damascene converstion to cuts now from his previous stance almost overnight.

A deal has been done between the coalition and the BoE and it is the BoE keeps it policy loose i.e .5% interest rates and liquidity schemes and the Govt will take inflation out of the system by cuts and tax rises.

If the economy keeps growing strongly I think you will see VAT used as the tool to cool it down I would expect Osbourne to rise in stages another 1% on VAT in the Autum then 1% Jan and then the final .5% end of the tax year as opposed to one hit next april. Also he would cut deeper quicker because the private sector would pick up the people being made redundant in the public sector faster.

BoE rate at .5% to 1% for at least the next 2 years and maybe for 4 to 5.

But raisung vat causes inflation not reduces it. The MPC have for several months been explaining away the current high rate of inflation partly on the 'temporary factor' of that vat increase in December. Further increases in VAT will just increase the figures for inflation further rather than having any real impact on dampening demand.

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But raisung vat causes inflation not reduces it. The MPC have for several months been explaining away the current high rate of inflation partly on the 'temporary factor' of that vat increase in December. Further increases in VAT will just increase the figures for inflation further rather than having any real impact on dampening demand.

One answer to this would be to devise another new measure of inflation, that is simply CPI with VAT taken out.

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No chance of a rate rise. Remember back to the formation of the coalition and it emerged that Vince, George and Merv had been having nice cosy chats about cuts and policy and Vince had a damascene converstion to cuts now from his previous stance almost overnight.

A deal has been done between the coalition and the BoE and it is the BoE keeps it policy loose i.e .5% interest rates and liquidity schemes and the Govt will take inflation out of the system by cuts and tax rises.

If the economy keeps growing strongly I think you will see VAT used as the tool to cool it down I would expect Osbourne to rise in stages another 1% on VAT in the Autum then 1% Jan and then the final .5% end of the tax year as opposed to one hit next april. Also he would cut deeper quicker because the private sector would pick up the people being made redundant in the public sector faster.

BoE rate at .5% to 1% for at least the next 2 years and maybe for 4 to 5.

Did you copy all that from May? VAT is going up to 20% in Jan 2011 in one go. Govts don't p**s about with VAT like base rates.

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Not at all suprised:

head teachers in London: pay=250K

assylum seekers London: living in 2million pound hoses

London Transport staff 15+% pay rise

BT: 10% pay rise

We have inflation++++++

Question is, does the MPC have the political independence to deal with it? In any other situation interest rates would have been raised 4 or 5 times in the last year. It's dangerous and does not bode well for public sector cuts and pay freezes. My guess is the Govt will just back down or unleash a Greek style wave of strikes and civil unrest.

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No chance of a rate rise. Remember back to the formation of the coalition and it emerged that Vince, George and Merv had been having nice cosy chats about cuts and policy and Vince had a damascene converstion to cuts now from his previous stance almost overnight.

A deal has been done between the coalition and the BoE and it is the BoE keeps it policy loose i.e .5% interest rates and liquidity schemes and the Govt will take inflation out of the system by cuts and tax rises.

If the economy keeps growing strongly I think you will see VAT used as the tool to cool it down I would expect Osbourne to rise in stages another 1% on VAT in the Autum then 1% Jan and then the final .5% end of the tax year as opposed to one hit next april. Also he would cut deeper quicker because the private sector would pick up the people being made redundant in the public sector faster.

BoE rate at .5% to 1% for at least the next 2 years and maybe for 4 to 5.

Osborne would only do this if he was insane and wanted to commit political suicide, business would crucify him! Do you know what is involved for a company when VAT is changed? repricing every item they sell, not to mention the hidious accounting that needs to be done if the change comes halfway through your VAT period. No, this will be a one off move.

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But raisung vat causes inflation not reduces it. The MPC have for several months been explaining away the current high rate of inflation partly on the 'temporary factor' of that vat increase in December. Further increases in VAT will just increase the figures for inflation further rather than having any real impact on dampening demand.

They use RPIy which is RPI less the VAT increase and any duty changes.

Edited by ralphmalph

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another day, another rates to go up thread.

up by what, 0.25% :lol::lol::lol:

You may :lol: ....

Debit interest rates charged have no correlation to base rates....base rates do not make one iota of a difference in the debt management world, unless your mortgage is linked to it.

Credit interest rates pay less unless you can be bothered to keep moving.

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The GDP forcast was for +0.6 growth the actual figure turned out to be +1.1

Don’t let the seemingly small figures fool you. This is a HUGE disparity!

Imo there’s lots of QE and stimulus money sloshing around in the system so we might attribute this gain to a genuine increase in economic activity however with both CPI and RPI waaay above target you can't ignore the inflation argument.

A rate rise might be on the cards sooner than you'd think. If not sooner then certainly much sharper increments when it does inevitably happen.

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A rate rise might be on the cards sooner than you'd think.

I wouldn't be so sure (and at least hope not as loving our 1% BOE tracker) :)

Yesterdays Bloomberg article puts some good points across for continual 0.5% until 2014....

http://www.bloomberg.com/news/2010-07-24/u-k-economic-growth-forecast-cut-on-budget-curbs-ernst-young-will-say.html

Ernst & Young LLP’s Item Club will cut its U.K. economic growth forecasts for the next three years and predict the Bank of England probably won’t raise interest rates until 2014 because of the government’s budget squeeze.

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Guest BetterOffOnBenefits

Look, we can't have the situation where feckless "homeowners" are forced to join the real world and pay real world interest rates.

The savings robbery must continue!!!!

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My advise is to ignore anyone who thinks they know what'll happen to interest rates over more than a 6 month period. Too much can and probably will happen.

The increase in the economic GDP figures is unlikely to convince enough BoE members to change their minds. Maybe there'll be a big increase in inflation which will convince some of them over the next 3-4 months though even that seems unlikely.

Sentance wants to increase rates very gradually. The others don't, which means we will have to wait some time for rates to go up and then they will go up steeply causing general misery to those unprepared.

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From the dailymail comments section

The ConDem's Budget, when they first announced their econnomic strategy, was on 22 June. These GDP figures cover the whole period from the start of April to the end of June. This means that Osborne has managed to turn the economy around in just 8 days, it was obviously heading nowhere under Labour.

This means that Osborne is probably the greatest Chancellor, ever.

As Abraham Lincoln is reported to have said "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time."

Oh I give up those days are long gone. These days it's starting to sound like something Eric and Ernie might have said.

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  • 146 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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