The “mpc Put” - Belief Among Homebuyers

[karhu]

http://www.economicsuk.com/blog/000338.html

Here, the MPC, whose new member David Blanchflower played a straight bat in evidence to the Commons Treasury committee last week, has got to a position where the expectation is that the next move in interest rates will be up, although probably not for some time. Fellow MPC member Paul Tucker said he was concerned about heightened inflation expectations.

Its reluctance to cut will be based on the risk of a British version of the Greenspan put. The “MPC put”, perhaps, is the belief among homebuyers that if anything bad happens, base rates, and therefore mortgage rates, will be cut. The stock market’s woes will, at the margin, have in any case boosted the case among investors for bricks and mortar.

Not only that but the Bank will have been cheered by tentative signs of a rebalancing of the economy. The CBI’s industrial-trends survey last week reported weak demand at home but an encouraging pick-up in export orders, the strongest for a decade. Business investment also showed a welcome rise in the first three months of the year, official figures showed.

Edited May 28, 2006 by karhu

[bubbleturbo]

This is David Smiths story in the times today.

Very mixed and reeks of back peddling. I think he is waking up to the fact that rates are headed up. The paragraph you quote above is him saying the B of E will NOT want to save the housing market and will do what is right, unlike Al Greenspan with what has been coined as the "Greenspan Put". He then goes on to say, it is OK as the OECD have said UK and Aus may have a "soft landing".

Funnily enough, next to it is an article by Irwin Schwitzer saying that the US will likely raise rates past 5% without a pause.

Very bearish and dare I say it "Hawkish" in the Times now, yesterday and today.

The times, they are a changin. . .

Edited May 28, 2006 by BubbleTurbo