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Interest Rates Will Go Up Quicker Than Anyone Expects, Ex-Bank Of England Officials Warn

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http://www.telegraph.co.uk/finance/economics/7925564/Interest-rates-will-go-up-quicker-than-anyone-expects-ex-Bank-of-England-officials-warn.html

Sir John Gieve, an ex-deputy Governor, and Charles Goodhart, a previous member of the Monetary Policy Committee, are the most senior economists yet to have opposed the current orthodoxy that rates will stay low for a prolonged period. The warning will come as a relief to savers but as a shock to homeowners, many of whom are able to meet their mortgage repayments only because of record low rates of 0.5pc.

Addressing Fathom Financial Consulting’s Monetary Policy Forum, Sir John said: “I am expecting a recovery – when that is strongly established I’d expect rates to start rising faster than the market currently expects. I wouldn’t be at all surprised to see interest rates at 2.5pc a year from now.”

Markets expect rates to be between 1pc and 1.5pc this time next year, according to Consensus Forecasts. The respected Ernst & Young ITEM Club has predicted they will not rise until January 2014.

Sir John added: “I think the Bank will have learned a lesson from the Greenspan years after the dotcom boom when the US was very slow to raise rates back to normal levels. When the Bank thinks recovery is established they will want to normalise quite quickly.”

Mr Goodhart is less optimistic about the economy but fears the Bank will have to raise rates to tame inflation as food prices soar. The price of bread is poised to climb after wheat futures rose in July at their fastest monthly rate in 51 years, partly a result of wildfires in Russia’s fertile Volga River region. Data from the British Retail Consortium (BRC) today shows that food inflation increased from 1.7pc in June to 2.5pc in July, fuelling Mr Goodhart’s fears.

He said: “There is a looming possibility we may get a spike in food prices rising out of climatic conditions, and not just temporarily. I wouldn’t be surprised if food prices lead a rise in inflation of 0.5 percentage points by the fourth quarter [of the year].”

Policymakers at the Bank, who are expected to leave rates on hold for a 17th consecutive month this week, are facing their toughest dilemma since taking responsibility for rates 13 years ago. “We’re going to have subdued growth for five or six quarters but a temporary increase in inflation. What do you do when inflation is still above the upper limit when the economy is looking extremely soggy?” Mr Goodhart asked.

The Bank has a 2pc inflation target and must write a letter of explanation to the Chancellor if it climbs above 3pc or falls below 1pc. Inflation is 3.1pc, and has been above target for 41 of the past 50 months. Brian Coulton, head of European sovereign ratings at Fitch, said the markets may lose faith in the Bank if it stays above target too long, which would cause a collapse in sterling and force a rate rise. “A monetary policy shock is the biggest risk for a double-dip recession,” he said.

I see they are still talking up the recovery. Wow for 9 months out of 50 Mystic Merv hit the inflation target. Would running monetary policy on luck be better?

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I would be astounded to see 2.5% rates a year from now. He's talking out of his ****.

ditto, in fact if i was a betting man i think they will be lower in 12 months.

3 years, thats a different matter, id wager they,ll be in double figures by then

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ditto, in fact if i was a betting man i think they will be lower in 12 months.

3 years, thats a different matter, id wager they,ll be in double figures by then

Somebody was suggesting that the coalition will be leaving it until midterm before taking the necessary economic action to stop us joing the third world. High interest rates triggering HPC looks highly likely.

So maybe decent rates in 2 years and, when they don't work in halting inflation and stopping a currency slide, double figures.

Certainly in LIBOR, whether the increasingly irrelevant baserate does this is anyone's guess.

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It makes you wonder how these people (SIR John Gieve et al) have the bloody nerve to show their faces, let alone open their mouths.

They presided over the biggest credit bubble in history, they stood by and allowed the banks to lend the same money over and over again and put themselves in the position where they had to be bailed out by us - or have the whole banking system collapse.

Yet they feel their opinion is worth something.

In a sane world they would be pilloried (literally, in the stocks) so that those of us who have suffered because of their utter incompetence could sling our rotten vegetables at them.

Why aren't they introduced as ... 'Sir John Gieve, one of the men who failed to spot the banking crisis developing, one of the men who thought you could base growth on debt - forever ...

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Somebody was suggesting that the coalition will be leaving it until midterm before taking the necessary economic action to stop us joing the third world. High interest rates triggering HPC looks highly likely.

So maybe decent rates in 2 years and, when they don't work in halting inflation and stopping a currency slide, double figures.

Certainly in LIBOR, whether the increasingly irrelevant baserate does this is anyone's guess.

At the minute we seem to be storing up all our problems in the hope they'll somehow be sorted out later. We are still living way beyond our means in the UK.

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We will be in the same place the US is in about 6 months or so. The double dip has yet to hit--there has been no fallout yet from the 4-5TR debt Elephant in the room, no fallout from the proposed (not yet) job cuts and no reaction to our widening trade deficit made worse by the soaring Pound.

These two ex-bankers are clueless and are as dumb about a recovery as the ordinary Express Sheeple.

If I am wrong, we all owe Mr. Brown one helluva big apology and I will be first to write to him to that effect.

IR will go down or stay the same for a loonnnng time.

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It makes you wonder how these people (SIR John Gieve et al) have the bloody nerve to show their faces, let alone open their mouths.

They presided over the biggest credit bubble in history, they stood by and allowed the banks to lend the same money over and over again and put themselves in the position where they had to be bailed out by us - or have the whole banking system collapse.

Yet they feel their opinion is worth something.

In a sane world they would be pilloried (literally, in the stocks) so that those of us who have suffered because of their utter incompetence could sling our rotten vegetables at them.

Why aren't they introduced as ... 'Sir John Gieve, one of the men who failed to spot the banking crisis developing, one of the men who thought you could base growth on debt - forever ...

So true. yet in an environment where the best of the best MUST keep their social standing, where Public servants cant be sacked or have their redundant jobs realise to joblessness, where financiers found to have done wrong can wait years for a slap on the wrist from the FSA, where politicians can "retire" to lucrative boards in reward to services rendered, where party supporters can "work" in the Quango club for fortunes, is it unexpected that failures are unrecalled and the new gurus have found a new way?

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We will be in the same place the US is in about 6 months or so. The double dip has yet to hit--there has been no fallout yet from the 4-5TR debt Elephant in the room, no fallout from the proposed (not yet) job cuts and no reaction to our widening trade deficit made worse by the soaring Pound.

These two ex-bankers are clueless and are as dumb about a recovery as the ordinary Express Sheeple.

If I am wrong, we all owe Mr. Brown one helluva big apology and I will be first to write to him to that effect.

IR will go down or stay the same for a loonnnng time.

Agreed. The BoE hands are tied, if rates go up then so does Sterling, shoving us further into the lions mouth. The next move from the wizards of Threadneedle Street is more QE.

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Agreed. The BoE hands are tied, if rates go up then so does Sterling, shoving us further into the lions mouth. The next move from the wizards of Threadneedle Street is more QE.

Perhaps both?

Higher rates with QE?

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Perhaps both?

Higher rates with QE?

I've wondered about this but it seems to lack credibility, then again this is the UK, land of the quarter million pound slave-box, so anything is possible.

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I've wondered about this but it seems to lack credibility, then again this is the UK, land of the quarter million pound slave-box, so anything is possible.

Since when has UK monetary policy been credible?

Increasing interest rates whilst printing seems a bit of an oxymoron but I can see it happening.

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Sir John added: “I think the Bank will have learned a lesson from the Greenspan years after the dotcom boom when the US was very slow to raise rates back to normal levels. When the Bank thinks recovery is established they will want to normalise quite quickly.”

Mr Goodhart is less optimistic about the economy but fears the Bank will have to raise rates to tame inflation as food prices soar.

It's only a week or so ago that someone similar was saying that interest rates would be staying low until 2013 or so because the economy is in such a bad way.

They so haven't a clue.

The UK is so led by donkeys.

Edited by billybong

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It makes you wonder how these people (SIR John Gieve et al) have the bloody nerve to show their faces, let alone open their mouths.

They presided over the biggest credit bubble in history, they stood by and allowed the banks to lend the same money over and over again and put themselves in the position where they had to be bailed out by us - or have the whole banking system collapse.

Yet they feel their opinion is worth something.

In a sane world they would be pilloried (literally, in the stocks) so that those of us who have suffered because of their utter incompetence could sling our rotten vegetables at them.

Why aren't they introduced as ... 'Sir John Gieve, one of the men who failed to spot the banking crisis developing, one of the men who thought you could base growth on debt - forever ...

Did Mr. Gieve go door to door forcing sheeple to take loans? The sheeple for the most part are the architects of their own misfortune, the bankers just helped them a bit with the structure IMO. This mess will have to end with some sort of "event" which forces rates up, something the coalition can do nothing about and can`t waffle their way around, otherwise they will just tread water as long as they can, trying to make things look stable?

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It's only a week or so ago that someone similar was saying that interest rates would be staying low until 2013 or so because the economy is in such a bad way.

They so haven't a clue.

The UK is so led by donkeys.

Interest Rates Won't Rise Yet, Says Bank Of England Policymaker

It was the Miles chap - 16 July 2010

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  • 144 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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