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Shock Uk Rate Rise Not Ruled Out At Feb Meeting

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http://www.reuters.com/article/2011/02/07/britain-boe-idUSLDE7160MB20110207

LONDON, Feb 7 (Reuters) - The Bank of England will have to decide this week whether its first priority is to tackle soaring inflation or to support Britain's fitful economic recovery.

Such opposing risks put Britain's central bank in an unenviable dilemma and mean Thursday's decision is the first since rates were cut to record lows in March 2009 when investors have felt in any real doubt about the outcome on rates.

News Britain's economy contracted at the end of 2010 has encouraged analysts to stick with their view that the BoE will keep interest rates on hold until much later in the year. A Reuters poll last week showed only 21 out of 67 analysts thought rates would go up before the fourth quarter.

However, with pipeline price pressures building and the BoE's credibility under threat, money markets ICAPSONIA are pricing in around a 20 percent chance of a quarter point rise to 0.75 percent this week, and a 100 percent chance of such a move by May.

The contrast between analysts' views and Sterling Overnight Interbank Average Rates may partly reflect overshooting by the market. After many months when investors saw little need to hedge against a rise in interest rates, they have been piling into the market to do so, distorting prices. [iD:nLDE712198]

UK interest rates have stood at 0.5 percent since March 2009, when the BoE slammed monetary easing onto full throttle to protect the economy from the ravages of recession and deflation.

Fast-forward two years and Britain's problem is with prices rising rather than falling. Inflation hit an eight-month high of 3.7 percent in December, almost twice the central bank's target, and looks set to rise even higher in the coming months.

"We expect the Monetary Policy Committee will leave rates on hold at the upcoming meeting but it may be a much closer call than many expect," said Michael Saunders, UK economist at Citi.

"We expect that inflation will stay above target for an extended period, not just this year but probably 2012 and 2013 as well."

Edited by Pole

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".....................BoE slammed monetary easing onto full throttle to protect the economy from the ravages of recession and deflation."

Yes, during recession we must NOT have the cost of the things we need to come down in price - clearly unacceptable!

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"We expect that inflation will stay above target for an extended period, not just this year but probably 2012 and 2013 as well."

What, what, what!?! :o

But inflation will be lower in 18 months time. It must be true, kindly Uncle Merv told me so.

Has all his vigilance been for nought? :(

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How exciting! I'd say there's probably now no more than a 1 in 5 chance. But I'm very much enjoying reading the minutes lately.

Edited by Pent Up

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What, what, what!?! :o

But inflation will be lower in 18 months time. It must be true, kindly Uncle Merv told me so.

Has all his vigilance been for nought? :(

Fear not, Merv will get his full pension <_<

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25 basis points... what's the point? It sounds like a gesture to show an attempt to 'do something', when they have little intention of doing anything substantial.

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until we get above inflation savings rates

they are robbing us

they are financial terrorists exploiting 90% of the people

so the elite 10% can stay in control

to take control away from them you have to remove your money from their clutches

and protect yourself

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If they do go up, expect the inflation figures out the week after to be an absolute belter.

I can't see it happening though. If IRs do go up, I personally will eat my hat. I would post a picture of that here, but I still can't work out how to do that, so you'll have to take my word.

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If they do go up, expect the inflation figures out the week after to be an absolute belter.

I can't see it happening though. If IRs do go up, I personally will eat my hat. I would post a picture of that here, but I still can't work out how to do that, so you'll have to take my word.

+1

If it happens you know there is going to a monster inflation figure the week after.

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25 basis points... what's the point? It sounds like a gesture to show an attempt to 'do something', when they have little intention of doing anything substantial.

25 bp is better than nowt. It'll send a message to home 'owners' /vendors as their trackers go up a notch and general sentiment will be just that little more negative. That'll do me for now.

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What, what, what!?! :o

But inflation will be lower in 18 months time. It must be true, kindly Uncle Merv told me so.

Has all his vigilance been for nought? :(

You clearly haven't studied the 'pin-point accurate' BoE fan charts, have you?

cpimktnov10large.gif

:blink:

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Yup Merv Kunt is inflation proofed up to the eyeballs. Tosser.

He's inflation-proofed, but in the form of index-linked Gilts issued by the Treasury. The longer he holds interest rates low, the more debt the government can accumulate and the more unlikely it becomes that the principal can ever be repaid. These financial geniuses may retire to find that they are owed a real terms fortune by a bankrupt government.

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25 bp is better than nowt. It'll send a message to home 'owners' /vendors as their trackers go up a notch and general sentiment will be just that little more negative. That'll do me for now.

It's all about the sentiment. Anything up from where we are now will signal the end of ZIRP and more rises coming in the future.

Same concept as when a small MoM decline in HPs shifts the whole annual figure negative. The nominal effect is minimal but pyschologically it communicates volumes about where things are heading in the future.

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Not ruled out :lol:

If changes were ruled out, what exactly would be the point of meeting?

Is this another 'we state the bleeding obvious so you dont have to think' article?

More likely the idea that every 11th article about a subject in the media needs to take an opposing angle to the other ten to keep people interested and newspapers selling etc.

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I think once inflation goes above 4% (by their bogus measurements that is) for any length of time, then they will raise rates

I remember reading an IMF document some time last year which recommended that Western Economies should run inflation of 4% for a few years and abandon the 2% target. I'm sure that this is the new orthodoxy but they are just not letting on

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I think once inflation goes above 4% (by their bogus measurements that is) for any length of time, then they will raise rates

I remember reading an IMF document some time last year which recommended that Western Economies should run inflation of 4% for a few years and abandon the 2% target. I'm sure that this is the new orthodoxy but they are just not letting on

Inflation of 4% even by their made up measurements should result in the Governors enforced "retirement."

I wonder how vigilant Merv would be if his pension depended on it. That's the problem with this country. those making the decisions are detached from reality. Success or fail, they are quids in anyway.

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excellent.

IMO, this is all good bearish stuff. The minutes of the meetings for the next month or two will make interesting reading. Will there be still 2 members voting for a rise this time?

We only need three more and Fisher recently commented on Worrying high inflation and Bean hinted at a forced "not nice rate rise" just last week. That's potentially another two.

In the minutes they basically all agreed on the benefits of rising rates. They just didn't all vote for it.

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We only need three more and Fisher recently commented on Worrying high inflation and Bean hinted at a forced "not nice rate rise" just last week. That's potentially another two.

In the minutes they basically all agreed on the benefits of rising rates. They just didn't all vote for it.

And then Sentance retires :(

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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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