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Bank Of England: No Need To Raise Interest Rate As Low Wages Are Slowing Down Inflation

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http://www.dailymail.co.uk/news/article-2002867/Bank-England-No-need-raise-rate-low-wages-slowing-inflation.html

Interest rates do not need to rise despite surging inflation, the Bank of England says.

A study by the Bank published today suggests that rates can be safely held at 0.5 per cent in order to prevent growth from stalling.

It shows that while energy and food costs are soaring, there is little evidence that short-term price rises are feeding through to wages or long-term price setting by big companies.

This eases fears that consumer price inflation will continue to run at more than twice the Treasury’s 2 per cent target. There is widespread concern that Britain is heading for a period of ‘stagflation’ – when prices rise as the economy stagnates.

But the Bank says today in its influential Quarterly Bulletin that ‘long term inflationary expectations remain anchored by the monetary framework’, which is sure to be a relief to Chancellor George Osborne.

Excellent so the VI decides there is no risk at holding rates at 0.5%.

Although this fits in with what Merv has been saying about expecting a decline in living standards, perhaps he does believe that prices are no catching up with wages? Which means prices rises for perhaps several years, although at that point inflation could be set in and very difficult to stop.

Still at least you get a knighthood for this.

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It shows that while energy and food costs are soaring, there is little evidence that short-term price rises are feeding through to wages or long-term price setting by big companies.

It will be too late if and when there's "large" evidence, that is if in the real world there isn't already. Surely soaring energy & food costs can only push things one way anyway

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It will be too late if and when there's "large" evidence, that is if in the real world there isn't already. Surely soaring energy & food costs can only push things one way anyway

Nah thats deflationary though.

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Huzzah!

GDP rising whilst disposable income falls. Some cheap and easy credit will fill that expectation gap.

ATTENTION! All construction workers please report for road duty. The can is approaching the end of the existing tarmac.

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Inflation is over target and firms have been confident passing on price rises. Ok so this is not relevlant to future decisions but I assume firms will just continue as is. If they interview companies are they likely to say they intend to jack up prices?

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Excellent so the VI decides there is no risk at holding rates at 0.5%.

Although this fits in with what Merv has been saying about expecting a decline in living standards, perhaps he does believe that prices are no catching up with wages? Which means prices rises for perhaps several years, although at that point inflation could be set in and very difficult to stop.

Still at least you get a knighthood for this.

I agree with Merv..

The only way in which hiking IRs would slow or reverse inflation would be by hiking the pound. This would wreck what remains of our export industries and push yet more jobs overseas. Meanwhile, higher IRs would push many borrowers over the edge, and reduce the disposable income of many, many others. The loss of jobs in exports combined with the reduction in domestic demand would lead to a sharp recession, dropping tax revenues and hence making the current deficit much worse (a la Ireland, Greece, et al).

The fact is that the pound was massively overvalued for years (witness the huge trade deficit and loss of manufacturing industry). Re balancing that means a period of import-cost-driven inflation is going to happen.

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If they interview companies are they likely to say they intend to jack up prices?

Companies ARE jacking up prices however they are being covert about it though. I noticed the 450gram blocksof cheese shrank to 400 grams then 370 grams then 350grams then 320 grams then 300 grams in the space of 6 months. Price stays the same though. Deflation in action.

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I agree with Merv..

We've got to have the reset some time in the next 5-10 years the later it is the worse it becomes.

Thus can default now i.e. jack interest rates to say 2000% crash the economy have rioting in the streets me hunting you people for sport for 2 or so months. Having the army recalled martial law declared, food riots for a bit until order is restored.

Or we can kick the can down the road again so that the apocalyptic scenario lasts much longer forcing me to buy more cages more ammo and more arrows. As the apocalypse will just last longer say Zimbabwe type longer (7-9 years!)

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Companies ARE jacking up prices however they are being covert about it though. I noticed the 450gram blocksof cheese shrank to 400 grams then 370 grams then 350grams then 320 grams then 300 grams in the space of 6 months. Price stays the same though. Deflation in action.

I assume in the BoE stats that doesn't show up? As long as the price remains stable it's fine?

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I assume in the BoE stats that doesn't show up? As long as the price remains stable it's fine?

I forget who said it but BoE stats are fiddled if the price goes up it goes out the basket. Then the next month it is added back at the higher price fix skipping the price increase. Which to to their stats = no inflation since it wasn't in the basket last month it has increased £0.

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A study by the Bank published today suggests that rates can be safely held at 0.5 per cent in order to prevent growth from stalling.

Hmmm that doesn't quite work when inflation is 5.2% though. It destroys descretionary spending as people have to pay more for essentials. Im sure that will be great for the economy though?

Edited by Pent Up

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I forget who said it but BoE stats are fiddled if the price goes up it goes out the basket. Then the next month it is added back at the higher price fix skipping the price increase. Which to to their stats = no inflation since it wasn't in the basket last month it has increased £0.

Clever, pity they don't rotate the whole basket like a football team each month. We'd have stable prices then and 0% inflation.

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Hmmm that doesn't quite work when inflation is 5.2% though. It destroys descretionary spending as people have to pay more for essentials.

Deflation dear, deflation is 5.2%

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Clever, pity they don't rotate the whole basket like a football team each month. We'd have stable prices then and 0% inflation.

Might have worked a few years ago, doubt they could fill the basket with shit without it going up now.

The bankrupt of england have moved from (possibly unintentional) bubble blower and consequential economy wrecker to overt wealth, income, savings destruction via enforced inflation and higher costs. They have learnt nothing and are going to compound the damage they have done before.

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I don't understand the notion of keep rates low to stop growth stalling when the borrowing rates are perhaps even higher than they were pre-crash.

There is no growth.... step back a little bit. The policy of the BoE and the government of all colours is not what you think.

All they seek to do is delay the inevitable crash by kicking the figurative can down the road a bit longer (storing up bigger problems). To enable them to loot the economy for as long as possible.

Come next election the tory/libs want to win again because they want to continue looting. Labout want to get in because they want to loot the economy again.

ZIRP just delays it a bit so they can continue the looting.

If they cared they'd do an iceland and crash the economy now totally for a bit to allow rebuilding from the ground up.

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Boiling the populace like frogs.[/size]

They can boil as fast as they like, because the sides of the pan are too high to jump out even if you know whats going on.

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They can boil as fast as they like, because the sides of the pan are too high to jump out even if you know whats going on.

And for good measure the lid is on the pan as well to increase the pressure and prevent any escape.

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It shows that while energy and food costs are soaring, there is little evidence that short-term price rises are feeding through to wages or long-term price setting by big companies.

It will be too late if and when there's "large" evidence, that is if in the real world there isn't already. Surely soaring energy & food costs can only push things one way anyway

Precisely!I don`t understand how they expect the current state of affairs to last for ever.Although continuing uncertainty means people do not expect imminent wage rises, surely all this is doing is create pent up wage expectations that would come into play as soon as confidence returns when, for instance, workers will demand 10-15% hikes instead of 4-5% to compensate for real income lost through the sustained inflation.When that happens, even 10-15% IRs won`t be enough to reign in inflation

Edited by thirdwave

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Precisely!I don`t understand how they expect the current state of affairs to last for ever.Although continuing uncertainty means people do not expect imminent wage rises, surely all this is doing is create pent up wage expectations that would come into play as soon as confidence returns when, for instance, workers will demand 10-15% hikes instead of 4-5% to compensate for real income lost through the sustained inflation.When that happens, even 10-15% IRs won`t be enough to reign in inflation

Proper economic confidence wont fully return until all the unpayable debts have been defaulted so there are no worries there

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  • 277 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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