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Experts Predict Interest Rate Freeze

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http://www.manchesteronline.co.uk/men/busi...ate_freeze.html

ECONOMISTS believe the Bank of England will overwhelmingly agree to keep interest rates on hold at 4.5% this week - sparing Governor Mervyn King from having to use his casting vote.

Only eight members of the Bank's Monetary Policy Committee (MPC) will sit round the table for the April meeting following Richard Lambert's decision to join the CBI as director general.

The CBI lobbies the Government on behalf of UK business and the Bank said that Mr Lambert's new role could result in "a conflict of interest" when it came to setting the cost of borrowing.

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His immediate resignation means that Mr King will have a casting vote in the event of a 4-4 decision on whether to change rates.

Investec analyst Philip Shaw said: "In practice, though, Mr King is unlikely to have to use it.

"Given recent economic news, the result of the meeting is likely to be an overwhelming vote to keep official rates at 4.5% for the eighth month in a row."

Stephen Nickell has been the only MPC member to argue the case for lower borrowing costs over the past four months and testimony to the Treasury Select Committee last week suggested his views have not changed since March.

But economists do not expect any of his colleagues to join him even though Kate Barker told MPs that she had some sympathy for the case put forward by Mr Nickell.

Ms Barker said there was spare capacity in the UK economy and the MPC's central projection for growth was too optimistic in her view, but worries that rising energy prices would encourage employers to pay bigger salaries meant there was little urgency for a rate cut.

HSBC economist John Butler rated a no-change decision as "very likely" because inflation was at the target of 2% and GDP growth in the first quarter was likely to be around trend.

But he added: "Underneath the surface there are two opposing forces: an accelerating housing market and rising unemployment."

Evidence of this pick-up in demand for property was provided by the Nationwide Building Society which said the 1.1% gain in house prices in March had only been bettered once during the past 20 months.

Its view of the market was confirmed by property website Hometrack which said house prices increased by 0.5% during March - the highest increase since the summer of 2004 and the fourth consecutive month of growth.

It would be the height of irony if we got a surprise .25% base rate hike because 'house prices increased by 0.5% during March'

TLM

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I am glad it's not my job to set i.r. Between a rock and a hard place.

Why ? - its the easiest job going at the moment - you just have to leave them where they are. The upwards forces and the downwards forces are in balance. The MPC have done a brilliant job, in maintaining stable and low IRs. The whole idea of the MPC is to keep inflation low and IRs stable so that business can plan sensibly for the future.

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Why ? - its the easiest job going at the moment - you just have to leave them where they are. The upwards forces and the downwards forces are in balance. The MPC have done a brilliant job, in maintaining stable and low IRs. The whole idea of the MPC is to keep inflation low and IRs stable so that business can plan sensibly for the future.

I agree. IR policy has been very well managed since the Chancellor made the MPC independant.

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Why ? - its the easiest job going at the moment - you just have to leave them where they are. The upwards forces and the downwards forces are in balance. The MPC have done a brilliant job, in maintaining stable and low IRs. The whole idea of the MPC is to keep inflation low and IRs stable so that business can plan sensibly for the future.

They have done a masterfull job in keeping inflation low. With affordable house prices, gas, electricity and council taxes we have a lot to be thankful for. Let's hope they continue to keep the rates frozen while the rest of the world raises rates as they face inflationary pressures that do not exist here. If sterling drops and pushes the prices of imported fuel and other goods up we can just adjust CPI to factor out those items that are inflationary.

So lets not keep complaining about the B o E and give congratulations where they are due. <_<

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Why ? - its the easiest job going at the moment - you just have to leave them where they are. The upwards forces and the downwards forces are in balance. The MPC have done a brilliant job, in maintaining stable and low IRs. The whole idea of the MPC is to keep inflation low and IRs stable so that business can plan sensibly for the future.

If it wastn't for a number of asset bubbles and the huge increases in energy and core services I might agree with you.

The 2% inflation figure is a little bit laughable. If you really think inflation is 2% you are living in a dream world.

At the same time I do think they have done as good a job as could have been expected. The problem is leaving interest rates steady now is not going to help in the long run. Eventually the economy has got to pay back this debt, the question is how the BofE encourages this without pushing the whole ecnomy into a recession. Unfortunatly I am not sure that's going to be possible. Allow inflation to take some of the edge of debts is probably their best bet - but I think people are already beginning to get concerned about inflation - and once the inflation cat is out of the bag you can't put it back in again.

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They have done a masterfull job in keeping inflation low. With affordable house prices, gas, electricity and council taxes we have a lot to be thankful for. Let's hope they continue to keep the rates frozen while the rest of the world raises rates as they face inflationary pressures that do not exist here. If sterling drops and pushes the prices of imported fuel and other goods up we can just adjust CPI to factor out those items that are inflationary.

So lets not keep complaining about the B o E and give congratulations where they are due. <_<

You can prise your tongue out, now... :D

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If it wastn't for a number of asset bubbles and the huge increases in energy and core services I might agree with you.

The 2% inflation figure is a little bit laughable. If you really think inflation is 2% you are living in a dream world.

At the same time I do think they have done as good a job as could have been expected. The problem is leaving interest rates steady now is not going to help in the long run. Eventually the economy has got to pay back this debt, the question is how the BofE encourages this without pushing the whole ecnomy into a recession. Unfortunatly I am not sure that's going to be possible. Allow inflation to take some of the edge of debts is probably their best bet - but I think people are already beginning to get concerned about inflation - and once the inflation cat is out of the bag you can't put it back in again.

The old measures, RPI and RPI-x show a similar story to CPI

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If it wastn't for a number of asset bubbles and the huge increases in energy and core services I might agree with you.

The 2% inflation figure is a little bit laughable. If you really think inflation is 2% you are living in a dream world.

At the same time I do think they have done as good a job as could have been expected. The problem is leaving interest rates steady now is not going to help in the long run. Eventually the economy has got to pay back this debt, the question is how the BofE encourages this without pushing the whole ecnomy into a recession. Unfortunatly I am not sure that's going to be possible. Allow inflation to take some of the edge of debts is probably their best bet - but I think people are already beginning to get concerned about inflation - and once the inflation cat is out of the bag you can't put it back in again.

I think you have summed up Bernanke's approach to inflation. Once inflation begins it has a self-perpetuating momentum that has to runs its course no matter high the IR go--as we saw in the 1980's. The Fed's approach is to kill inflation before it pokes its head out of the bag. The problem is that I believe it is already too late as inflation began around 1996 when HPI took off. Something has to pay for all that "equity" that seemed to appear from nowhere but which is actually borrowed money that will have to be repaid through higher IR or rampant inflation and extremely high IR. The creditors will not accept devalued dollars and pounds as repayment which is why they will hike IR to maintain the value of their loans. The only question is how high will the rates go as the debt is repaid?

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Look, the BOE are letting the sheeple get used to the idea that rates are not going down. This is going to take some time.To be perfectly fair you can't blame the sheeple for thinking they were going down with all that has been written about cuts.Sheeple believe whatever senario is more pleasant. If someone who normally reads the Mirror stumbles across some jibberish from David Smith, economist (apparently), in The Times they'll take it as gospel. This belief or looking forward to interest rate cuts is probably what has made the market pick up slightly because the sheeple sure were crapping themselves when the rates were going up.

Give it a while, and let's see if Blair gets out of the way, then you'll see the rates go up.If he doesn't make way then he may be forced. Same result.

The boom is over and it will revert, world economic forces are moving against asset price inflation. But the state that we are in was not acheived overnight, infact it's built up over 8 years. The correction,likewise, will not be overnight perhaps anything up to 5 years. Having said that with the amount of leverage and debt around at the moment I would not be suprised if 70-80 % of the falls (of whatever the fall may be) actually occur in the first 18 months of the widely accepted downturn.

;)

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There will be no house price crash until interest rates rise.

No prime minister with £4million worth of debt is ever going to let interest rates rise by very much.

He has to go.

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Why ? - its the easiest job going at the moment - you just have to leave them where they are. The upwards forces and the downwards forces are in balance. The MPC have done a brilliant job, in maintaining stable and low IRs. The whole idea of the MPC is to keep inflation low and IRs stable so that business can plan sensibly for the future.

Seeing the MPC sets interest rates it isn't exactly too tough a job to keep them low is it??

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Guest Charlie The Tramp

You can't blame the sheeple for thinking rates are going down because THEY DID in august 05.

Yes, I will always remember that infamous meeting. ;)

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  • 302 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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