Jump to content
House Price Crash Forum
R K

Haldane - U K Real Interest Rates Could Remain Negative For 40 Years

Recommended Posts

Has he invented a time machine or a future prediction machine?

It's what the market (hive) thinks.

Mind you they're pretty rubbish too.

The main messages of Andrew’s speech are:

  • In June, as he made clear in a speech, he put even weight on moving interest rates sooner (which he termed being ‘on the front foot’) and moving interest rates later (being on the back foot). Three months on, the statistics now appear to favour the back foot.
  • Recent evidence, in the UK and globally, has shifted Andrew’s views about the likelihood of weaker outcomes. That reflects markdowns in global growth prospects and weak pipeline inflationary pressures, both from wages and prices internally, and energy and commodity prices externally. He is gloomier about demand and sees inflationary forces weakening in the near term. This implies that interest rates could remain lower for longer than he had expected three months ago, without endangering the inflation target.
  • Turning to the performance of the UK economy, Andrew notes various reasons to be cheerful: ‘growth at the top of the G7 league table’ and ‘well balanced between consumption and investment’; ‘borrowing costs at exceptionally low levels’; ‘employment up 1.8 million since its trough’ and unemployment falling from 8.4% to 6%, and expected to fall further. The combination of GDP growth, inflation and unemployment suggests that the economy is in ‘fine fettle’ and has only been bettered in 5 of the last 44 years.
  • But looking at a different set of indicators suggests ‘reasons to be fearful’. ‘Growth in real wages has been negative for all bar three of the last 74 months’. ‘The level of productivity is no higher than it was six years ago’. And real interest rates are around zero. This combination of poor economic outcomes is ‘virtually unprecedented going back to the late 1800s, with the exception of the aftermath of the world wars and the early 1970s.’
  • Andrew concludes that the economy appears to be ‘writhing in both agony and ecstasy. It is twin peaked’.
  • Looking forward he suggests that the key issue is which of these twin forces will win out. The Monetary Policy Committee’s forecast suggests that by 2017, ‘productivity growth and real wage growth are back to around 2% and real household deposit rates are in positive territory’ or in other words ‘the sun will come out tomorrow’. But Andrew notes that such forecast have been confounded in the past, and he also notes that the low level of expected real interest rates implied in the UK’s yield curve may reflect pessimistic assumptions about future growth prospects.
  • Turning to the labour market he finds more evidence of polarising patterns: ‘the upper peak of the labour market is clearly thriving in both employment and wage terms. The mid-tier is languishing in both employment and real wage terms. And for the lower skilled, employment is up at the cost of lower real wages for the group as a whole’.
  • Turning to the implications for interest rates, he suggests that financial market participants must weigh up the likelihood of the UK taking a strong path or a weak path – the twin peaks he has been discussing. ‘Over the past few months, the implied path for interest rates has shifted down’. ‘One interpretation of that move is the market now assigning a somewhat higher probability to the lower peak’. That is also his own assessment of how the balance of risks has shifted.
Edited by R K

Share this post


Link to post
Share on other sites

BoE's total failure in predicting even 6 months ahead and goes for distraction tactic and predicts way out over the visible horizon. Well past most of their retirements.

It must be something to do with the recovery.

Edited by billybong

Share this post


Link to post
Share on other sites

It is a horrible admission.

An admission that they have so utterly wrecked that the economy that savings will no longer return a postive real rate, that outright theft is the rule of the day for the next 40 years.

Did he offer to resign after that statement?

He should have.

Share this post


Link to post
Share on other sites

In June, as he made clear in a speech, he put even weight on moving interest rates sooner (which he termed being ‘on the front foot’) and moving interest rates later (being on the back foot). Three months on, the statistics now appear to favour the back foot.

It must be something to do with the hokey cokey. With them running things it's like the UK has its shoe laces tied.

There has to be something better than that lot.

Share this post


Link to post
Share on other sites

It's what the market (hive) thinks.

Mind you they're pretty rubbish too.

But looking at a different set of indicators suggests ‘reasons to be fearful’. ‘Growth in real wages has been negative for all bar three of the last 74 months’. ‘The level of productivity is no higher than it was six years ago’. And real interest rates are around zero. This combination of poor economic outcomes is ‘virtually unprecedented going back to the late 1800s, with the exception of the aftermath of the world wars and the early 1970s.’

I think it's worse than that, never in the history of central banking have all the major economies had ZIRP. He's being disingenuous it is unprecedented going back to formation of the first central banks in 1668 Riksbank and BoC 1694!

Edited by interestrateripoff

Share this post


Link to post
Share on other sites

It must be something to do with the hokey cokey. With them running things it's like the UK has its shoe laces tied.

There has to be something better than that lot.

Maybe he read the nirp warning thread on here. Personally I think he is right. But Scepy said it first

Share this post


Link to post
Share on other sites

Maybe he read the nirp warning thread on here. Personally I think he is right. But Scepy said it first

Tis all those boomers with their savings wot done it.

Blame the war.

Share this post


Link to post
Share on other sites

BoE's total failure in predicting even 6 months ahead and goes for distraction tactic and predicts way out over the visible horizon. Well past most of their retirements.

It must be something to do with the recovery.

This was featured on BBC news with an overpaid talking head. The obvious question was, Should we get rid of the BofE? It wasn't asked.

Bottom line: the age of making money off money is over.

Share this post


Link to post
Share on other sites

Tis all those boomers with their savings wot done it.

Blame the war.

Which war exactly?

Iraq I & II (now possible Iraq III)

The Cold War

Vietnam

WWII which bankrupted Europe

WWI which bankrupted Europe

Boer War

Franco-Prussian War 1870-1871

Waterloo

Share this post


Link to post
Share on other sites

So a few days of the stock market falling from its inflated heights and QE will be extended and interest rates will be at bugger all for an eternity.

I really have no intention of working once ive bought my over priced house.

Share this post


Link to post
Share on other sites

Which war exactly?

Iraq I & II (now possible Iraq III)

The Cold War

Vietnam

WWII which bankrupted Europe

WWI which bankrupted Europe

Boer War

Franco-Prussian War 1870-1871

Waterloo

WWII. For the post-war boomers. They'll die off eventually of course and in the process consume some of their own savings, as they should.

Share this post


Link to post
Share on other sites

Considering we are now in deflation and likely to remain so for a long time there is no reason why interest rates should be above 0.1%.Nothing will stop whats going on and the house price crash wont be brought on by higher rates but by falling real incomes.Its highly probable wages will slowly fall through less overtime,smaller bonuses,smaller pensions ,less benefits etc.Possible interest only will become rent forever from the bank.

This was always where we were going and the reason high debt levels are a very bad idea for people,and companies.We will probably see good growth and inflation again at some point.Probably when we start to really colonize Mars or similar such efforts.

Share this post


Link to post
Share on other sites

Considering we are now in deflation and likely to remain so for a long time there is no reason why interest rates should be above 0.1%.Nothing will stop whats going on and the house price crash wont be brought on by higher rates but by falling real incomes.Its highly probable wages will slowly fall through less overtime,smaller bonuses,smaller pensions ,less benefits etc.Possible interest only will become rent forever from the bank.

This was always where we were going and the reason high debt levels are a very bad idea for people,and companies.We will probably see good growth and inflation again at some point.Probably when we start to really colonize Mars or similar such efforts.

Plus of course higher taxes and lower spending/reduction of services. Even corporate welfare is likely to struggle going forward as their unofficial government subsidies decline.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   215 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

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.