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The Times: Rate Hike Looms


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HOLA441

http://business.timesonline.co.uk/article/...2184607,00.html

Thushani Gajasinghe, an economist for the Centre for Economic and Business Research said: "Walton’s vote … will increase interest rate expectations and suggests that the MPC is becoming increasingly concerned about looming inflationary pressures."
Activity in the foreign exchange markets this morning reinforced that impression. In trading after the publication of the minutes, sterling rose above $1.90 for the first time in a year.

http://www.iii.co.uk/news/?type=afxnews&ar...&action=article

LONDON (AFX) - The first three-way voting split on the Bank of England's rate-setting Monetary Policy Committee for nearly eight years has reinforced market expectations that the central bank will raise the cost of borrowing in August.
The minutes to the May meeting, published this morning, showed that six MPC members voted to keep the key repo rate unchanged at 4.50 pct, but that David Walton voted for an immediate quarter point hike and Steve Nickell, in his final meeting, called for a quarter point reduction.
It was the first three-way split since August 1998 and also only the third such occasion since the bank was granted its independence in 1997.
Analysts said the departure of Nickell, who has voted for a cut at six consecutive occasions, means there is a tightening bias developing on the MPC.
"Last week's inflation report showed that the committee's view is that inflation will be persistently above target for three years if base rates remain at 4.50 pct," said Philip Shaw, chief UK economist at Investec Securities.
"Our impression is that the MPC is planning to raise rates in August (alongside the next inflation report) and that it will take a run of soft data to dissuade the committee from pulling the trigger," he added.
That's certainly the impression of the markets, with September short sterling, a gauge of near-term rate expectations, pricing in a hike, while the pound spiked up against its main competitors on mounting yield support.

This is good news for a HPC as not only will higher IR mean less borrowing and more stress on troubled sellers, the soaring pound will cripple exports and push up the rate of unemployment.

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HOLA442

I'm not sure that one rate hike is going to do "it". What's more, I think we'll soon get a single rate hike, the market will continue on its current progress for a bit, but we'll have legions of idiots crowing that the market adsorbing a single rate hike is solid proof that house prices will not crash no matter how high interest rates go.

Billy Shears

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HOLA445

Too little, too late, will be the probable response from the MPC.

A feeble 0.25% rise is the likely outcome when what is needed is a pre-emptive 0.5% IR rise to send a very clear message to this nation of debt-junkies.

Hi,

And this is where the UK and the US, EU and Japan have diverged. Fear over longer term inflation, displayed in ballooning broad growth money supply, housing bubbles and rising commodities, have prompted those nations to act earlier, in a preventive manner. Particularly the EU, their more preventative approach - the ECB have used the term 'sustainable consumption' in context of economic restraint policy - have allowed the current UK treasury to crow about 'slow coach europe' while watching house prices spiral into orbit, fuelled by loose credit and borrowing. Very naughty. Even the US have hit back hard against inflationary pressures. Everyone, internationally, seems to have. Given the recent rises in sterling today and yesterdays inflation figures (the coming months figures are likely to absorb the ever increasing commodities rises), looks like it's TTRTRates at long last by our 'independent' BoE. 4.5% is just not a neutral interest rate for the UK economy, estimimates are put more around 5.5-5.75% on that score. It's a little worrying if a reflationary interest rate has to be maintained to try to prop up the economy when all it's really doing is sucking more speculative credit into house prices with very little reflationary affect into industry and the high street (beyond encouragement of greater consumer indebtedness). We seem to be seeing every week now a major industrial or business closure or relocation. The speculative housing market in the UK is indirectly and slowly sucking the life out of industry and business.

Can we pin this thread in the economics section later on? Since this is one of those running threads?

http://www.statistics.gov.uk/cci/nugget.asp?id=19

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My 6 month lease ended in February guess what--no increase around here. The West Midlands is being battered by job losses and many BTLs being sold (or attempted sales) because stagnant wages and no wages means no rent hikes.

The same will apply everywhere as recession looms. Rents will continue to fall making BTL investing a poor prospect in the years ahead.

The top was about a year ago. Buy low and sell high--its the only way to invest. Hold too long and you get burned no matter what commodity you trade BTL or Gold.

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Whatever. I'm just about to start negotiations for a large reduction in Wandsworth.

Just negotiated 10% cut in my rent in Somerset. The cut was a reflection of falling rents and the abundance of property to let in my area.

FWIW My rent is just 30% of what it would cost me to if I bought the place on a repayment mortgage.

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Guest Baffled_by_it_all

Mmmm. Rent rising season is upon us again.

Not up in North London it isn't. My rent hasn't increased in three years...If they tried it they'd have a big void like the flat beneath me (which was empty for four months)

How amusing of you to think you can do that though! TTCYTS!

Edited by Baffled_by_it_all
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Just negotiated 10% cut in my rent in Somerset. The cut was a reflection of falling rents and the abundance of property to let in my area.

FWIW My rent is just 30% of what it would cost me to if I bought the place on a repayment mortgage.

FWIW? It's worth the good news to the letting sector that the country is full of people like you!

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Just to add my 2p worth (or is that now 3p worth with the price of copper as it is?)

My rent has been the same for four years now. May ask for a reduction when it comes up for renewal at the end of the year :D

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Just to add my 2p worth (or is that now 3p worth with the price of copper as it is?)

My rent has been the same for four years now. May ask for a reduction when it comes up for renewal at the end of the year :D

you are already getting a reduction.

In real terms, accounting for inflation you are paying 10%+ less than 4 years ago.

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