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"ir To Be Left Untouched On Thursday"

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http://www.independent.co.uk/money/spend-save/bank-of-england-expected-to-leave-interest-rates-untouched-2179991.html

The Bank of England is expected to leave interest rates untouched on Thursday despite fears over surging inflation and commodity prices.

The feeble nature of the economic recovery means the Bank is unlikely to raise its base rate from its all-time low of 0.5% this week. The Consumer Price Index (CPI) measure of inflation rose to 3.3% in November, driven by the rising cost of oil, clothes and food, and the Bank admits it could rise as high as 4% by the spring.

But the Bank's policy setters, who are tasked with keeping CPI at 2%, would rather brave above-target inflation than risk tipping the economy back into a "double-dip recession", said economists. A further round of quantitative easing, or money printing, is also not expected because this would further add to inflationary pressures. Howard Archer, chief economist at IHS Global Insight, said: "The Bank's Monetary Policy Committee are now in a very difficult position.

"Although the UK market achieved very decent growth in the second and third quarters it is still in a very fragile state following the deep recession.

"We suspect most committee members will be reluctant to adjust policy until they get a clear idea of how the economy is reacting to fiscal policy being tightened from the start of 2011."

The recovery appears to have faltered in December, hindered by the Arctic weather. Markit/CIPS data showed that the construction sector fell further into decline in December, while the powerhouse services sector contracted marginally for the first time in 20 months, leaving only the manufacturing sector in growth. Markit economists downgraded their expectations for the UK's GDP growth in the fourth quarter from 0.5% to 0.4% following the announcements.

GDP figures for the second and third quarters were also revised down from 1.2% to 1.1% and from 0.8% to 0.7% respectively, adding to fears over the strength of the recovery. Putting up interest rates may help reduce inflation but it would also reduce the spending power of homeowners with tracker mortgages and people repaying other debts and further endanger the recovery.

The Bank also believes that most of the inflationary pressures are temporary and should fall back in a year's time. But that will be little comfort to consumers whose pay packets are not keeping up with inflation. There has been a barrage of bad news for cash-strapped consumers in recent weeks as petrol, gas and clothes all rose in price, and last week's VAT rise from 17.5% to 20% pushed up the cost of most goods and services. Economists disagree on when interest rates, which have been at their current level since March 2009, will rise.

Vicky Redwood, UK economist at Capital Economics, said interest rates were unlikely to be changed until 2013. Howard Archer, and Malcolm Barr of JP Morgan Chase, do not expect interest rates to rise until late 2011. However, last month the CBI warned that rates would start to rise by the spring and the base rate would hit 2.75% by the final quarter of 2012.

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"The Bank also believes that most of the inflationary pressures are temporary and should fall back in a year's time."

That says it all. More of the same in 2011.

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"The Bank also believes that most of the inflationary pressures are temporary and should fall back in a year's time."

That says it all. More of the same in 2011.

They've been saying that for the last 2 years.

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We should just round these people up and then guillotine them, like the French did.

no one cares as long as there's footlball at weekends and booze at shops.

take the football away - now, that may wake people up.

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no one cares as long as there's footlball at weekends and booze at shops.

take the football away - now, that may wake people up.

& turn off ITV...

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no one cares as long as there's footlball at weekends and booze at shops.

take the football away - now, that may wake people up.

i tend to think that football has had its day with most of the public, and celebraties, for a few years every celeb had to swear aliegence to one team or another now you never hear much of that and even have quite a few saying they dont bother with football. I think football fever is definetly on the wane.

football also is shit

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football also is shit

FIFA being living proof of that statement. Indeed I think FIFA and the MPC have a lot in common. Making it up as they go along!

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i tend to think that football has had its day with most of the public, and celebraties, for a few years every celeb had to swear aliegence to one team or another now you never hear much of that and even have quite a few saying they dont bother with football. I think football fever is definetly on the wane.

football also is shit

Aye, but who do you support?

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The Keynesians and the statists at the Bankrupt of England still don't get it and nothing has changed with regards to the government or parliament, still full of corrupt liars determined to make the crash even bigger and painful for the average person.

Take your medicine now King, eat humble pie for once in your disgraceful career

Edited by punter

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We should just round these people up and then guillotine them, like the French did.

+1

Economic growth of a . of a %

Prices rises of over 10% of the most essential goods.

And rising unemployment.

The only thing growing is the asset values of the fat cats.

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Guest The Relaxation Suite

You have to ask yourself who benefits from low rates, and then you know why they will be low for as long as possible. That pensioners, savers and the prudent are being crushed to death is irrelevant.

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For mortgage borrowing, personal unsecured borrowing, credit cards and SME business borrowing, the base rate is now largely irrelevant. Where a loan is possible, the sum of the arrangement fee, the level of security required against it and the interest rate simply make a mockery of the '0.5% low interest rate' headline rate.

The longer base rates stay at 0.5%, the more likely more banks and other lenders are to become more disconnected from it in terms of their offers of loans.

Essentially, central banks lose the ability to control downwards real interest rates when their headline rate falls this low (maybe the control is lost even when base rate are 2% or less imo)

But, if the base rate goes up by a tick, you can be sure that lending offers will reflect that quickly.

Of course, on the savings side its the other way - low savings rates to keep the (as big as we can) margin there for the lender.

In an environment where inflation is running at 3%+(+) then firms have to increase their profits by more than that to be judged to be doing well. For banks, manipulation of the interest rate differential between lending and borrowing is their most obvious lever to do that.

I am not sure the if the interest rate differential between saving / lending has settled down yet - it seemed to be about 7% on small business loans when I looked last. Historically it had dropped to 4 or even 3%

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& turn off ITV...

+17

Watched some of that dancing on ive nonsense last night.

It starts with music that hits the right beat to get your pulse up, flashing lights to entrance you and then clapping by audience to hypnotise you.

In years to come the secret documents that showed how they learn to mass hypnotise and addict people will be released.

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"The Bank also believes that most of the inflationary pressures are temporary and should fall back in a year's time."

That says it all. More of the same in 2011.

As they have told us for 10 years or more, which is how come we have had high overall inflation in the longest era of low inflation. EG Think of everything that has been ignored in the CPI stats over the years, then think of bellow inflation interest rates over the same period. Notice how food has inflated by around 40% in the last 3 years while we have had 3% or less official inflation, or Transport costs have quietly been ignored, along with most of the esentials of life, all balanced out of course with the cheaper toys we have been importing. The only time they will come down hard on inflation is when wages start rising, this has always been the case and is the reason they have quietly been able to skin us alive with inflation over the last decade. They know this and this is one of the reasons they have been more than happy with the offshoring of jobs and importation of sweatshop labour into the UK (and even Labour was quietly happy the unions have been out of the picture since Magie did away with them).

If indeed they were measuring inflation correctly then how come say a big system like the railways have had to put up prices beyond inflation most years for at least the last 12 years? A big system will use a wide cross section of the materials and services that are provided in the UK and their cost increase should very accuratley measure inflation across the board, dito a council with rate rises.

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We'll never see >1% base rate in my or any of your guy's lifetime.

You could well be right.

I'm sure in Japan they thought the base rate would rise, 15+ years on and it's still on the floor where it landed with no signs of it ever rising...

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We'll never see >1% base rate in my or any of your guy's lifetime.

That is almost worthy of being placed in a sig. It is an epic call, which is going to get rammed back down your throat inside the next 2 years.

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That is almost worthy of being placed in a sig. It is an epic call, which is going to get rammed back down your throat inside the next 2 years.

Agreed, and done. I am 27, if interest rates stay that low until the 2060s-70s I'll eat Kirsty's hat on my deathbed.

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You have to ask yourself who benefits from low rates, and then you know why they will be low for as long as possible. That pensioners, savers and the prudent are being crushed to death is irrelevant.

People that do not spend do not contribute to the economy. The UK economy is built on consumer spending. Banks don't need (nor want) savers - they get their base moeny elsewhere and cheaper. Gordon Brown was prudent and it didn't do him much good :D:D As to the old farts well they need to have all their money taken away - they won't spend so what use are they?

So yes. Low IR for a while yet. Inflation isn't really very much either if you take out the tax hikes ;)

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  • 312 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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