Mervyn King: High Inflation Will Not Force Rate Rise

[Injin]

http://www.guardian.co.uk/business/2010/nov/10/inflation-interest-rate-rise-king

The Bank of England predicted today that inflation in Britain would remain above its target for the whole of next year as the rise in VAT in January and dearer imports affect the cost of living.

Mervyn King, the Bank's governor, admitted that inflation continued to exceed Threadneedle Street's expectations, but gave no hint that the nine-strong monetary policy committee was about to raise borrowing costs in response.

The governor told a press conference to launch the Bank's quarterly inflation report that inflation was forecast to fall back to its target in early 2012 once the impact of the temporary factors pushing up prices diminished.

Despite the reassurance to borrowers that there was little prospect of interest rates being raised, the City said the stubbornness of inflation coupled with stronger growth in the second and third quarters of 2010 made further boosts to growth from the MPC less likely. The pound rose and gilt prices fell after the publication of the inflation report.

King said there was no shortage of explanations for the current level of inflation, citing a 25% drop in the value of the pound since 2007, the surge in global commodity prices and big changes to VAT.

"It is not surprising that the combined effect of all of these factors has led to movements in inflation that are larger than those experienced in the period 1992-2007. Indeed, were it not for these factors, our inflation experience might well have been closer to that in the United States, with inflation about as far below as it is currently above target."

Under its remit from parliament, the governor has to write a letter to the chancellor should inflation move more than a percentage above or below its 2% target, as measured by the Consumer Prices Index (CPI). Today's report noted that there remained a "high probability" that King would need to pen further letters to George Osborne in the coming months.

"Inflation is likely to remain above the 2% target throughout 2011. Over this period, the projection is higher than in August, largely reflecting higher import prices, stemming from the recent depreciation of sterling and increases in a range of commodity prices. "

The governor expressed confidence that the economy would avoid a double-dip recession and would be able to cope with the tax increases and public spending cuts planned by the chancellor.

etc

V for velocity?

[19 year mortgage 8itch]

http://www.guardian.co.uk/business/2010/nov/10/inflation-interest-rate-rise-king

V for velocity?

V for vagina.

What a *****

[Sour Mash]

He's already hand-waving away continued high inflation as being caused by the forthcoming VAT rise, as predicted here ever since the rise was announced ...

Strange how he never discussed the deflationary effect of the VAT cut at a time when we were being bombarded with the official 'deflationary death spiral' line of ********.

[General Congreve]

V for vagina.

What a *****

I know, my savings are going to be smoke if this keeps up. What the hell can you do when TPTB are so blatantly robbing the prudent?

Edited November 10, 2010 by General Congreve

[South Lorne]

http://www.guardian.co.uk/business/2010/nov/10/inflation-interest-rate-rise-king

V for velocity?

...going for inflation to deflate debt and savings ....as rampant as possible seems to be the rule....the indebted will be saved.....

[OnlyMe]

In other news man who pisses in poeple's wallets warns of rain. Read the comments - we've reached breaking point, this shit is not going to be swallowed by the general public for much longer another 20% on food and King Kunt & Co's credibiility will be shot to shit.

Tighten your belts for Christmas: Bank boss warns Britons face soaring living costs as bill hikes and VAT rise begin to bite

Read more: http://www.dailymail.co.uk/news/article-1328355/Bank-Englands-Mervyn-King-warns-Britons-face-soaring-living-costs.html#ixzz14vQXXoTb

[northwestsmith2]

Expectations of inflation are very powerful, as the BOE have stated.

Unless the public start fearing inflation there is no hope for QE as Mervyn has said.

This is less about financial bullets and more like throwing the gun.

" For a

given path of nominal market interest rates, if households and companies expect higher

inflation, this implies lower expected real interest rates, making spending more attractive

relative to saving. "

Edited November 10, 2010 by northwestsmith2

[OnlyMe]

He's already hand-waving away continued high inflation as being caused by the forthcoming VAT rise, as predicted here ever since the rise was announced ...

Strange how he never discussed the deflationary effect of the VAT cut at a time when we were being bombarded with the official 'deflationary death spiral' line of ********.

Funny that isn't it.

All their pension money is in inflation linked bonds, has been even when they are ****-mouthing about deflation. Fraud.

[General Congreve]

Well Merv has shown his hand, so we know the way the wind is going to blow.

But what the hell can de done to stop those that have prudently saved a deposit, or trusted the free market and STR'd, being robbed to line the pockets of the banks and govt.? :angry:

Edited November 10, 2010 by General Congreve

[Pole]

I still can't figure out why some people would have any respect for the guy.

[tallguy]

My money is getting tied up and it aint in the shiny stuff. Too bloody useless for my liking.

[tallguy]

Well Merv has shown his hand, so we know the way the wind is going to blow.

But what the hell can de done to stop those that have prudently saved a deposit, or trusted the free market and STR'd, being robbed to line the pockets of the banks and govt.? :angry:

There is no such thing as a free market (and never was)

The "free market" is no more or less a fantasy than any of the others invented by TPTB in order to ensure that they remain TPTB and you don't get a look in.

These fairy stories are there to serve one purpose and that is to convince the rest of you that the way things are is because of some kind of "natural order" of things

God

The divinity of kings/religious leaders

Socialism

Capitalism

etc...

All bullsh*t

Same old same old

Edited November 10, 2010 by tallguy

[pie-eater]

Buy property as a hedge against inflation.

Oh............

[General Congreve]

There is no such thing as a free market (and never was)

The "free market" is no more or less a fantasy than any of the others invented by TPTB in order to ensure that they remain TPTB and you don't get a look in.

Too true. But the extent to which the 'free' market in housing in the UK has been paralysed by TPTB is amazing. The US seem to have got their crash, hopefully we'll follow.

I see you don't support the useless yellow shiny stuff. How are you protecting your savings from Merv's inflation? I need tips please.

[_w_]

I know, my savings are going to be smoke if this keeps up. What the hell can you do when TPTB are so blatantly robbing the prudent?

Don't worry, this VAT induced hike is only temporary. After that we will get cost push inflation due to rising commodity prices and in no small part to the Americans: Naughty Americans!

And if it's cost push and exogenous, raising rates wouldn't serve any purpose and only harm those good people and businesses already struggling with rising prices so rates shouldn't be raised.

...

The script has already been written. There is a stage where you have to move beyond prudent or they _will_ rob you of everything you have.

[General Congreve]

Don't worry, this VAT induced hike is only temporary. After that we will get cost push inflation due to rising commodity prices and in no small part to the Americans: Naughty Americans!

And if it's cost push and exogenous, raising rates wouldn't serve any purpose and only harm those good people and businesses already struggling with rising prices so rates shouldn't be raised.

...

The script has already been written. There is a stage where you have to move beyond prudent or they _will_ rob you of everything you have.

But how do you move beyond prudent? What would you suggest?

[tallguy]

Too true. But the extent to which the 'free' market in housing in the UK has been paralysed by TPTB is amazing. The US seem to have got their crash, hopefully we'll follow.

I see you don't support the useless yellow shiny stuff. How are you protecting your savings from Merv's inflation? I need tips please.

Farm land, It's the only thing that will hold it's value I think. And, perhaps, other key essential resources. The trouble with other key resources, though, is that you need storage. The only alternative to that is to buy indirectly on massive leverage on the futures markets. Another mug's game in my opinion for the small guy. So land it is.

Also, if the fiat "price" does fall with land, the factis you still have something that they aint making any more of and so one way or another the price can only recover in the long run. In any event, i have frankly passsed the point of giving a sh*t what happnes to the price. I can think of a dozen ways to get that land to give me a return.

One thing I wouldn't touch with a bargepole is a house or real estate development land.

Edited November 11, 2010 by tallguy

[leicestersq]

I still can't figure out why some people would have any respect for the guy.

He is trying to devalued the pound without printing more money.

That might not be such a bad idea.

As India and China grow, we are going to get more commodity inflation, not much anyone can do about that. I suspect that they will have to raise interest rates sooner than they think.

[South Lorne]

Well Merv has shown his hand, so we know the way the wind is going to blow.

But what the hell can de done to stop those that have prudently saved a deposit, or trusted the free market and STR'd, being robbed to line the pockets of the banks and govt.? :angry:

....basically he is creating a belly tyre bubble to save the banks by keeping as many mortgages floating above water through asset appreciation triggered by inflation ...it's the '70's solution.....people will be spending their savings to beat the price rises ....and they will be investing in large trunk freezers in the garage to hold as much frozen meat as possible hedging against the soaring price rises.....just a repeat of all our yesterdays.......

Edited November 11, 2010 by South Lorne

[The Generation Game]

My money is getting tied up and it aint in the shiny stuff. Too bloody useless for my liking.

Investing in dominatrix futures?

[tallguy]

Investing in dominatrix futures?

futures markets are a mug's game of gambling for the small guy

Edited November 11, 2010 by tallguy

[pie-eater]

....basically he is creating a belly tyre bubble to save the banks by keeping as many mortgages floating above water through asset appreciation triggered by inflation ...it's the '70's solution.....people will be spending their savings to beat the price rises ....and they will be investing in large trunk freezers in the garage to hold as much frozen meat as possible hedging against the soaring price rises.....just a repeat of all our yesterdays.......

Or buying property, betting on the rising population and future freeing of credit.

Sheeple thinking, which has been a winner so far.

Edited November 11, 2010 by pie-eater

[General Congreve]

Farm land, It's the only thing that will hold it's value I think. And, perhaps, other key essential resources. The trouble with other key resources, though, is that you need storage. The only alternative to that is to buy indirectly on massive leverage on the spot markets. Another mug's game in my opinion for the small guy. So land it is.

Also, if the fiat "price" does fall with land, the factis you still have something that they aint making any more of and so one way or another the price can only recover in the long run. In any event, i have frankly passsed the point of giving a sh*t what happnes to the price. I can think of a dozen ways to get that land to give me a return.

One thing I wouldn't touch with a bargepole is a house or real estate development land.

Fair enough, but having just done a quick google search it isn't cheap is it? And this page was the cheapest land from about 10 pages across the UK I randomly searched:

http://www.uklanddirectory.org.uk/building-land-plot-sales-oxford.asp

I mean, is it even possible to buy a piece of land for the size of a typical deposit of under 50k?

As you suggest, other resources often have to be bought with massive leverage. Commodities such as wheat also need storing somewhere and are perishable.

What choice does this give the ordinary guy to protect his savings against the ravages of inflation?

Edited November 11, 2010 by General Congreve

[General Congreve]

....basically he is creating a belly tyre bubble to save the banks by keeping as many mortgages floating above water through asset appreciation triggered by inflation ...it's the '70's solution.....people will be spending their savings to beat the price rises ....and they will be investing in large trunk freezers in the garage to hold as much frozen meat as possible hedging against the soaring price rises.....just a repeat of all our yesterdays.......

That's a good point South Lorne, so seems we have a proxy in the 1970's for what is coming our way now.

Anyone know what investment class best protected savers from the ravages of inflation in the 1970's? It would be very helpful to know, as I imagine it's probably a reasonable punt that it may help protect the little guy this time too.

Edited November 11, 2010 by General Congreve

[South Lorne]

Or buying property, betting on the rising population and future freeing of credit.

Sheeple thinking, which has been a winner so far.

.....independent reading of the market based on the information to hand and to be received ongoing is the name of the self survival game....no two people will be identical in projection.....