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karhu

Shadow Mpc Votes 7-2 For Unchanged Rates

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http://www.economicsuk.com/blog/000328.html

Although the majority of members voted for no change in interest rates, and no members voted for an immediate increase, several members felt that interest rates would have to rise in the future, as a result of the medium-term impact of rapid broad money growth.

Tim Congdon said “The choice is between a modest rise in rates now or a more drastic one later”, but he believed that rates should be left where they were this month. David Smith, Chief Economist at Williams de Broë, suggested that he would not be surprised if rates had to rise before the year end.

Members of the SMPC were concerned that policymakers and commentators are focusing on ‘core inflation’ and therefore omitting from consideration key parts of price indices that relate to the underlying cost of living. This is particularly problematic when energy prices are rising rapidly for reasons that are not cyclical; in such circumstances, core inflation may understate underlying inflation and the policy stance will be too loose.

Edited by karhu

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My gut instinct is that they'll leave the rates steady until there's a need to move them rapidly, and potentially overshoot the balance point....but then again, what do I know...?

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My gut instinct is that they'll leave the rates steady until there's a need to move them rapidly, and potentially overshoot the balance point....but then again, what do I know...?

agreed - we have financial geniuses like sir john gieve on the MPC

I can see them hanging on and hanging on until the breaking point

so i'm up for a disorderly rise in rates :P

which is about par for the course for this government :lol:

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About 2/3 think they're going up, 1/3 think they're going to be on hold for the next six months and TTRTR thinks they're going down :lol:

Edited by karhu

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Hi

I voted for a rise, as I think that it is very likely that the US will continue to raise their rates in light of higher than expected inflation, as well as reports of better than expected economic results. I think that the ECB will raise rates in May and June, and the BoJ may also raise theirs.

With all three major ecomomies (US, EU and Japan) raising rates, I think that UK may raise as early as June, especially if the cost of petrol pushes inflation up in the short term.

On a similar note, I have downloaded the MPC voting history, and am attempting to look at trends. However, the MPC are quite cautious (!) unlike the shadow MPC. So, I was going to try and look at the voting history for the shadow MPC, but cannot seem to find it on the Bank of England website.

It is probably just me being inept, but could someone kindly post a link to where I could find these stats please?

Thanks in advance.

James

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On the thread about the Fed stopping publishing M3 stats I commented that persistent 12%+ M4 money supply growth in the UK was almost certainly becoming a serious concern for the MPC. You can see this is being reflected in the comments of the Shadow MPC members:

"Professor Philip Booth said he was concerned about the monetary aggregates, but a rate rise now would be fine-tuning for the sake of it. He voted to hold."

"Professor Tim Congdon said that the high rate of broad money growth is associated with asset price inflation. The puzzle is that domestic demand remains weak. The choice is a modest rise in rates now or a more drastic one later."

"John Greenwood said that there was no case for a rate cut, but that the rate should be held at its current level with a bias to raise."

"Dr Andrew Lilico said that rates would have to be raised higher than the present, and indeed higher than the market expects, at some time in the fairly near future - perhaps starting later this year."

"Professor Kent Matthews said that although market-based expectations signal low inflation, he was not convinced by the argument that the credibility of the Monetary Policy Committee anchors inflation expectations. Both narrow and broad measures of money are too high but, in particular, double-digit broad money growth warrants interest rates be raised in the future. He voted to hold with a bias to raise."

"David B Smith said that new research from the Bank for International Settlements and the Bank of England confirmed the view that output gaps affected short-run inflation, but that long-term inflation was governed by money supply growth. At some point in the future interest rates will have to rise. The question is, should this be pre-empted by raising rates now or later?"

The BoE cannot ignore M4 growth for much longer. The long term correlation with inflation is well-researched and understood (and Mervyn King has warned about it in the past). The MPC could be accused of negligence if they dismiss persistent double-digit money growth and CPI begins to take off.

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Oh this is class!

But the mortgage advisor, the Times economics editor and lots of other people told me that rates were going to go down and we were in a "low interest rate environment" now. . . .

:lol::lol::lol:

A couple of hikes, or even the realisation that hikes are in the pipeline and the market will tank.

Debt is real, wheras house prices are a matter or opinion
The "nice" era is ending

Mervyn King saw this happening years ago and a correction in house prices here is a foregone conclusion.

I think Brown knows it too, hence the sacking of Nickell, who frankly was starting to embarass the B of E.

The market in SE London was picking up, but that has stopped and it is now going into reverse again, lots of for sale signs and none of them flipping onto SSTC. . . . . . . As a few others have said, the semi-smart money is now running for the exits as it is dawning that IR's are set to rise.

Edited by BubbleTurbo

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I think Brown knows it too, hence the sacking of Nickell, who frankly was starting to embarass the B of E.

When did Steven Nickell get sacked - his name is still on the MPC?

Have you got a link for this story - seems to have by-passed me?

TB

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When did Steven Nickell get sacked - his name is still on the MPC?

Have you got a link for this story - seems to have by-passed me?

TB

Have not got a link, but uber Dove Nickell got booted.

I think his last meeting is this month. He is being replaced by Gieve, who knows nothing about economics. However, for Gordon to sack Nickell speaks volumes to me as he was so over the top doveish, if Gordon was going to want to over-rule Mervyn and reduce rates, Nickell would have stayed as he would have been a good front man for leading a doveish division within the MPC.

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I miss read your poll, I thought you were asking what is gonna happen next week. As it's 6 months times I change from a 'no change' to 'up, up and away'.

What I think is right proper stupid is how Andrew Lilico votes for a cut, then says they should go up near the end of the year. Surely that would be a terrible move... Could you imagine how the media would portray it.

BBC "Rates are going down... free money... buy buy buy"

MPC "Shoot. We were wrong in May [cough]. Rates are going up far more than they need have gone otherwise".

BBC "Buy buy buy"

And Peter J Warburton quotes Rightmove??? WTF. How unprofessional is that.

Edited by Jason

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Guest Bart of Darkness

My gut instinct is that they'll leave the rates steady until there's a need to move them rapidly, and potentially overshoot the balance point....but then again, what do I know...?

I think you're following Roy Walker's old advice on Catchphrase, "say what you see". You've seen this happen before, the delaying of necessary (but unpopular) economic action until it has to be done, then it's headless chicken time.

Should be interesting. :)

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And Peter J Warburton quotes Rightmove??? WTF. How unprofessional is that.

Interestingly, Warburton is arguably THE expert on the dangers that loose central bank policies have created over the past twenty years. He's the author of Debt & Delusion: Central Bank Follies that Threaten Economic Disaster, originally published in 1999, now reprinted by popular demand (secondhand copies were selling for up to $200 on Amazon).

His gives a stinging critique of the unmitigated credit expansion that's occurred since financial deregulation, and believes that this can only end in tears. In his comments for the republished book, he says:

More than that, like an abandoned mine, the book stands as a monument to what was already known about the global credit expansion and the strains in the financial system before the halving of equity market prices from the early 2000 peaks. Most importantly, and sad to say, this equity market trauma foreshadows even more disastrous results of the financial folly that has reached proportions unimaginable in the summer of 1998.

And so, the primary function of the book—“as a timely warning of the perils that lie ahead”—remains valid. Debt & Delusion exposes serious flaws in the development of the global financial system starting in the early 1990s, singling out the world’s largest central banks for special criticism. Their negligent oversight has permitted an explosion of corporate and household credit that has fueled a succession of false markets in stocks, bonds, and property.

Alarmed by the monster so created, the U.S. Federal Reserve has spent much of the past five years staving off the evil day when foolish lending turns into bad debt. Far from being the architects of economic stability and low inflation, the world’s central bankers have ushered in a new era of financial fragility and latent instability.

I bought the original, and it's a very good read, although I simply cannot agree with Warburton's discussed solution. He believes that the bust will be so catastrophic for borrowers that civil unrest is possible unless they are given help. This means a certain degree of monetisation of debt (read 'bailout') with the result that those who have saved and not taken on debt will be required to assist those who have borrowed heavily.

Sheesh.

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I bought the original, and it's a very good read, although I simply cannot agree with Warburton's discussed solution. He believes that the bust will be so catastrophic for borrowers that civil unrest is possible unless they are given help. This means a certain degree of monetisation of debt (read 'bailout') with the result that those who have saved and not taken on debt will be required to assist those who have borrowed heavily.

Sheesh.

I should read that book!

I can't even see how the Government could go about forcing money from people who have saved to the people who have not. Is there an example where it has happened in history (excluding Robin Hood)? I suppose the only way is to increase taxes to help bail out the indebted, but the problem here is those in debt would get stung by it anyway.

The only feasible way is to allow wage inflation to increase. But Mr King won't let that happen.

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Have not got a link, but uber Dove Nickell got booted.

I think his last meeting is this month. He is being replaced by Gieve, who knows nothing about economics. However, for Gordon to sack Nickell speaks volumes to me as he was so over the top doveish, if Gordon was going to want to over-rule Mervyn and reduce rates, Nickell would have stayed as he would have been a good front man for leading a doveish division within the MPC.

Thats not the view of the website

GIEVE is not replacing Nickell?

http://www.bankofengland.co.uk/monetarypolicy/overview.htm

Although I do agree that Nickell would say rate cut every time - he must have a few BTL's!!!

TB

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Guest

then it's headless chicken time.

It would appear that, recently, they have already been culling the chickens.

;)

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Imo this is the reason Sir Andrew Large left recently.

He was always bearish on IR, stating money supply as his main concern.

I think last August rate cut was the last straw for him and he no longer wished

to be associated with what was going on ,or where it could lead.

He may soon have an opportunity to pi$$ into the tent he recently left. :P

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  • 301 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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