Jump to content
House Price Crash Forum

The Bank Of England Clueless Thread


Recommended Posts

  • Replies 3.4k
  • Created
  • Last Reply

Top Posters In This Topic

Bloomberg:  Carney Hikes Rate in What May Be Final Pre-Brexit Push

Quote

The Equilibrium Rate

For the first time, BOE officials also published their estimate of the equilibrium interest rate -- known as r* -- the rate at which policy is neither accommodative nor tight.

The long-term trend of that rate is seen as having fallen by more than 2 percentage points since 1990, with shorter-term factors driving it temporarily even lower. The bank didn’t put a number on what r* is now -- beyond that it’s being pushed below a 2-3 percent range -- and Carney said the indicator is “as obscure as Brexit is prominent.”

The equilibrium interest rate?  I guess the MPC aren't fans of Minsky.

Link to post
Share on other sites
40 minutes ago, Will! said:

Bloomberg:  Carney Hikes Rate in What May Be Final Pre-Brexit Push

The equilibrium interest rate?  I guess the MPC aren't fans of Minsky.

So our equilibrium rate is lower than the current Fed Rate? What a joke. These lunatics can’t even get inflation to hit their target 2% let alone figure out what rate balances the economy perfectly! Clowns.

Link to post
Share on other sites
22 minutes ago, SOLZHENITSYN said:

So our equilibrium rate is lower than the current Fed Rate? What a joke. These lunatics can’t even get inflation to hit their target 2% let alone figure out what rate balances the economy perfectly! Clowns.

There are at least six different definitions of 'equilibrium' in the standard economics texts - all of them wrong or meaningless.

Link to post
Share on other sites
Just now, zugzwang said:

There are at least six different definitions of 'equilibrium' in the standard economics texts - all of them wrong or meaningless.

Ahh that explains it then. They’ll pick a number and select whichever definition of equilibrium matches the results best. Repeat.....clowns. 

Link to post
Share on other sites

Finally broke through the emergency measure base rate of 0.5% (after nearly 10 years) for the first time since March 2009.

 

Quote

Carney: The important thing to recognise is that UK households have worked hard over the last decade to get into a better financial position, they’ve paid down debt and put themselves in a better position to service their debts.

There is a lot more capacity for UK households to service their debts, Carney concludes.

He also cited new ‘mortgage affordability’ tests that are meant to prevent reckless borrowing.

Really? No all of them.


Crazy, I'm borrowing at 2% with a 5 year fix (repayment, no fees) when RPI is over 3%. Couple of work colleagues have just remortgaged and leveraged up last month. One extracted equity for a BTL deposit, bought with a 5 year fix and owes £300k (across 2 mortgages), current situation is effectively gifting him ~1% (£3k) per year via inflation, not to mention the rent extraction after debt replayment/maintenance costs. Tax changes will be arranged around wifes low income. No wonder so many are in the game. It crosses your mind but personally I find it parasitic and immoral, hence why I don't have a property portfolio beyond a place to live and grow a family.

 

 

Link to post
Share on other sites
34 minutes ago, DarkHorseWaits-NoMore said:

Finally broke through the emergency measure base rate of 0.5% (after nearly 10 years) for the first time since March 2009.

 

Really? No all of them.


Crazy, I'm borrowing at 2% with a 5 year fix (repayment, no fees) when RPI is over 3%. Couple of work colleagues have just remortgaged and leveraged up last month. One extracted equity for a BTL deposit, bought with a 5 year fix and owes £300k (across 2 mortgages), current situation is effectively gifting him ~1% (£3k) per year via inflation, not to mention the rent extraction after debt replayment/maintenance costs. Tax changes will be arranged around wifes low income. No wonder so many are in the game. It crosses your mind but personally I find it parasitic and immoral, hence why I don't have a property portfolio beyond a place to live and grow a family.

 

 

Worth repeating more than once.....post of the century.?

Link to post
Share on other sites
48 minutes ago, stuckmojo said:

Carney live on R4. Shame john humphries has no clue about money, because there could be a couple of stinging question to ask him.

I was listening to that and Carnage is a very smooth operator.  He slimmed his way round every question but at least he did answer them even if you don't like his answers.  The lack of apparent understanding about how much damage these policies of low interest/relaxed borrowing have done to the longer term economy is shocking.

Link to post
Share on other sites

Hi everyone, I'm a long time reader but not a poster.

 

Could someone explain to me in a nutshell what happened? Last time the BoE kept the interest rates low against expectation and the pound value dropped. This time, as expected, they raised it and the pound dropped again... Why? 

Link to post
Share on other sites
5 minutes ago, chev chelios said:

Hi everyone, I'm a long time reader but not a poster.

 

Could someone explain to me in a nutshell what happened? Last time the BoE kept the interest rates low against expectation and the pound value dropped. This time, as expected, they raised it and the pound dropped again... Why? 

I think it’s to do with the Carney interview this morning. He said a no deal Brexit is uncomfortably likely.

Link to post
Share on other sites
32 minutes ago, chev chelios said:

Hi everyone, I'm a long time reader but not a poster.

 

Could someone explain to me in a nutshell what happened? Last time the BoE kept the interest rates low against expectation and the pound value dropped. This time, as expected, they raised it and the pound dropped again... Why? 

The incompetent [email protected] was falling over himself to say that we will all be in our coffins before interest rates reach a decent level. If he wanted the £ to drop he could be described as a genius, having listened to him on many occasions he is certainly not a genius...

Link to post
Share on other sites
1 hour ago, mathschoc said:

https://news.sky.com/video/carney-interest-rates-rise-the-right-call-11457825

Carney suggests we would not be going back to rates of 5%

Love crystal ball statements like that, always backfire. 

 

I tend to believe him. US rates will probably peak around 3% this time and Hammond's already given the Bank the authority to print up another £750bn in QE if/when it sees fit; Carney's definitely got the ammunition to back up his calls.

Link to post
Share on other sites
20 hours ago, Sperm Donor said:

The incompetent [email protected] was falling over himself to say that we will all be in our coffins before interest rates reach a decent level. If he wanted the £ to drop he could be described as a genius, having listened to him on many occasions he is certainly not a genius...

What I don’t get is, Carney clearly doesn’t want to raise interest rates any more than he is absolutely forced to, so why talk down the £? A devaluing Sterling is one of the few things that could possibly force him to raise rates.....

Surely his actions last week are delivering him the worst of both worlds? Higher base rates plus a weaker £ which continues to stoke imported inflation? Wouldn’t the extra inflation just mean he is more likely to need to raise again?

Although I think Carney is a *****, I don’t believe he is stupid, so what am I missing here? 

Its not not like I see the real benefit of having a weak £ either. We don’t export much of anything anymore and we are net importers of most of our materials, clothes,  food & energy - so other than inflating the FTSE100 and possibly the very high end London housing market, I don’t get the benefits of devaluing ? 

Link to post
Share on other sites
7 hours ago, SOLZHENITSYN said:

What I don’t get is, Carney clearly doesn’t want to raise interest rates any more than he is absolutely forced to, so why talk down the £? A devaluing Sterling is one of the few things that could possibly force him to raise rates.....

Surely his actions last week are delivering him the worst of both worlds? Higher base rates plus a weaker £ which continues to stoke imported inflation? Wouldn’t the extra inflation just mean he is more likely to need to raise again?

Although I think Carney is a *****, I don’t believe he is stupid, so what am I missing here? 

Its not not like I see the real benefit of having a weak £ either. We don’t export much of anything anymore and we are net importers of most of our materials, clothes,  food & energy - so other than inflating the FTSE100 and possibly the very high end London housing market, I don’t get the benefits of devaluing ? 

As HPCers know, when Mark Carney became Governor of the BoE in July 2013 his plan was simple:  keep the Bank Rate low while talking about raising it soon, "look through" an above-target CPI, bet that Great Financial Crash 2 wouldn't happen before he stepped down in 2018 and then probably return to Canada and pursue a career in politics in the then opposition Liberal Party with the aim of the Liberals winning the 2019 federal election and him becoming a senior minister.  However, two things affected that plan:  The Liberals won the 2015 federal election and the Brexit vote.  The Brexit vote caused a re-evaluation of the UK economy, exposing its weaknesses, and the incompetence of the UK government is creating huge economic uncertainty, which if it continues will probably bring GFC2 forward.

Carney has extended his term to 2019 and I think his plan is not to try to prevent GFC2, but to be not in a position of responsibility when it happens and then to capitalise on the aftermath.  To do that he needs to both slow the flight from sterling enough to prevent it becoming catastrophic before June 2019 and he needs to be on the record that he's not responsible for GFC2 because he tightened monetary policy without thinking enough about the consequences.

I think it is significant that Carney has always refused to serve an eight-year term as Governor.

Edited by Will!
Link to post
Share on other sites
On 04/08/2018 at 15:51, Will! said:

..  The Brexit vote caused a re-evaluation of the UK economy, exposing its weaknesses, and the incompetence of the UK government is creating huge economic uncertainty, which if it continues will probably bring GFC2 forward.

...

Aren't we effectively in the middle of GFC2 already with the pound dropping so much?

It's almost as if anything is worth sacrificing at the HPI altar.  Let's crash a pound as long as house prices don't drop in pounds.

 

Link to post
Share on other sites
9 hours ago, Bear Hug said:

Aren't we effectively in the middle of GFC2 already with the pound dropping so much?

It's almost as if anything is worth sacrificing at the HPI altar.  Let's crash a pound as long as house prices don't drop in pounds.

 

The sterling oil price looks like staying comfortably north of £50 for the rest of the year. Historically, above £55bbl and the UK economy is sucking wind.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.