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Boe Holds Back On Ir Rises Against Global Trend

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BOE holds back on IR rises against global trend for fear of destabilising 'knife edge' economy

Can it be done?

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Yes, it will carry on until the £ drops us into hyper inflation. At some point there will be a confidence loss.

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Yes, it will carry on until the £ drops us into hyper inflation. At some point there will be a confidence loss.

It feels like that now (6%+?) and they are STILL pumping out fiddled 2% inflation figures

Wonder if they will redefine 'inflation' further?

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It feels like that now (6%+?) and they are STILL pumping out fiddled 2% inflation figures

Wonder if they will redefine 'inflation' further?

Totally agree. The figures are obviously meaningless, but what other countries are playing the same game?

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Totally agree. The figures are obviously meaningless, but what other countries are playing the same game?

The US saw a 2.5% rise in manufactured goods and read that as a reason for Ben to hike. The Fed have raised rates consistently in the face of inflation. There is obviously something Gordon is afraid of to be in a continuing accomodative position with our rates. My guess is that he knows its the end of the HPI-MEW culture and recession if rates are moved up.

Don't count of Gordon raising rates in August. IMO, he will want to see if there are three more months in a row of above 2.5% first.

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Also, IIRC we have the highest debt levels in Europe and the highest immigration in Europe (to surpress wage inflation)

IMO we, generally, don't seem to be 'following the pack'...

Edited by dnd

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Guest mattsta1964

Also, IIRC we have the highest debt levels in Europe and the highest immigration in Europe (to surpress wage inflation)

IMO we, generally, don't seem to be 'following the pack'...

That's because they want us to be low paid debt slaves for the rest of our lives. The end of freedom and democracy brought about by a labour government. Astonishing innit!

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The end of freedom and democracy brought about by a labour government. Astonishing innit!

What's astonishing about a labour government enslaving people? Their whole philosophy is based on enslaving the productive so they can buy votes from chavs, government employees and other welfare cases.

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Guest mattsta1964

What's astonishing about a labour government enslaving people? Their whole philosophy is based on enslaving the productive so they can buy votes from chavs, government employees and other welfare cases.

Doh! Of course! I'll just go and smack my head against a wall :D

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To show how against any form of IR rise the muppetts are:

http://uk.biz.yahoo.com/19072006/214/boe-v...hold-rates.html

The Inflation Report suggested interest rates would gradually rise, but added that there was no need to rush to do so with inflation expected to hit the government's target of 2.0% in two years time.

They are hoping the inflation rate will return to 2% WITHIN 2 YEARS TIME.

Could they be saying that they realise that the rate may rise to 2.5% (as it has done) or even more but there is no need to take action because what goes up eventually comes down?

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I disagree with this 'it will fall back to target in 2 years time' lark. The average over a period should be 2%, so if rates go above target they should also fall below target to even things out.

And it is always 'expected to be 2%'! What were they predicting 2 years ago? Not 2.5% thats for sure!

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But no-one has ever adequately (on this forum) explained why the UK should have higher interest rates than say Germany or France particularly in view of our more open and flexible economy. Perhaps UK IR's are at long last converging with the Euro zone which would imply a long-term lowering from today and even higher house prices.

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But no-one has ever adequately (on this forum) explained why the UK should have higher interest rates than say Germany or France particularly in view of our more open and flexible economy. Perhaps UK IR's are at long last converging with the Euro zone which would imply a long-term lowering from today and even higher house prices.

Because we have constantly have a higher money supply increase? Will that do?

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Because we have constantly have a higher money supply increase? Will that do?

Is it not because the ecconomy is outperforming the eurozone ones? We have had a higher GDP growth and hence higher interest rates. From what I have read interest rates follow GDP.

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Perhaps UK IR's are at long last converging with the Euro zone which would imply a long-term lowering from today and even higher house prices.

Perhaps pigs will fly, which would imply that I'll have to start wearing a construction helmet every time I go outdoors.

Back in reality land, when China stops exporting deflation and starts exporting inflation, interest rates are probably going back over 10%, unless the globalists can find another huge country with a huge and poor population to replace them.

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Perhaps pigs will fly, which would imply that I'll have to start wearing a construction helmet every time I go outdoors.

Back in reality land, when China stops exporting deflation and starts exporting inflation, interest rates are probably going back over 10%, unless the globalists can find another huge country with a huge and poor population to replace them.

1 pound = 1 euro. About fair value given that everything in the UK is overpriced compared with most of the world.

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Is it not because the ecconomy is outperforming the eurozone ones? We have had a higher GDP growth and hence higher interest rates. From what I have read interest rates follow GDP.

When Britain was the sick man of Europe it was in part (it was said) due to its high interest rates, which way round is it? In those days GDP growth was much less than in France or Germany. Inflation is a consequence of insufficient productive capacity to meet demand so for sure debased money, printing it or paying puclic sector workers too much will increase it but bad as the UK is its no worse than France in this respect, and its productive capacity seems to be able to respond to increased demand faster. IRs will fall in the medium term.

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BTB may be right. IMO, the real reason Gordon and his bankers are holding off on hiking is summed up in three words:

United States Recession.

It seems clear than Ben is going for a "soft landing" for the US economy and erring on the side of caution with regard to IR. He knows that the housing market is collapsing significantly in the froth zones while the rest of the country experiences a soft landing in the real sense of that word.

California is the world's 8th or 9th largest economy. They will also feel the most pain in the HPC. Demand will fall and the effects will be felt nationally. Ben also knows America has too much debt and he will continue to reign in spending if the HPC does not do it for him.

Ben is hoping that a severe HPC will not trigger a severe recession. He knows that a huge proportion of the US GDP is housing related and any falls in property are going to have collateral damage.

Merv knows all of this and he also knows that when America sneezes we catch a cold. Thus, it may be unwise for him to pre-empt a recession by triggering the landing here before it comes naturally from accross the Atlantic.

There is nearly always a lag of about 6 months for the waves to hit us. The Great Crash of 1989 was a case in point. I therefore think we shall start to see some significant signs of recession as winter approaches and higher IR will have filtered through into mortgages and other loans in any event as the Yen Carry Trade takes its toll.

Gordon will not admit that the US is going to slow the economy down for us and that is why he can aford to do nothing, even in the face of inflation hikes. But I do think this is what he and his bankers have in mind. All in all, I think the BoE were wise to leave rates alone. The UK economy is far too weak.

http://www.sky.com/skynews/article/0,,3040...0,00.html?f=rss

City analysts - and the BoE - are concerned that continuing increases could bring consumer spending to a halt.
Edited by Realistbear

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When Britain was the sick man of Europe it was in part (it was said) due to its high interest rates, which way round is it? In those days GDP growth was much less than in France or Germany. Inflation is a consequence of insufficient productive capacity to meet demand so for sure debased money, printing it or paying puclic sector workers too much will increase it but bad as the UK is its no worse than France in this respect, and its productive capacity seems to be able to respond to increased demand faster. IRs will fall in the medium term.

The way I understand it if you have high GDP growth, this puts a strain on the resources available and this causes inflationary pressure hence an increase in interest rates. Why our intrest rates are highr than the eurozone.

Why immigration is such a good thing as I understand it. High GDP and still plenty of slack and hence low interest rates. A win win situation. Maybe the ecconomy could not grow fast enough when we were the sick man of europe? Restrictive immigration maybe?

There the limits of my understanding lies. I, like my namesake, am still trying to get to grips with all the supra national stuff. I would be happy to be enlightened.

Edited by gordonbrown

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Just seen Ed Balls on the Daily Politicsdiscussing inflation/economy with Ken Clarke

Balls talking balls as usual - his and Brown's "tough decisions" are apparently to spend more money on public sector :blink:

Was asked if he thought interest rates should go up, he refused to answer, and suggested that BoE is in fact ahead of the curve in the fight against inflation, in that BoE started to raise IRs 2 yrs ago, whilst the rest of world is now playing catch up.

He also stated the if consumer spending slows, as a result of higher costs/inflation, then the appropriate action for BoE to take would naturally be to cut rates.

Ken Clarke started to talk about our old friend Stagflation, to which Balls quickly talked labour-econo-speak to drown him out, at which point the interview was wound up

I think this clearly shows where Brown'n'Balls are going to be steering things at BoE

Looks like Brown and Bernanke Bernanke have chosen inflation

Stagflation/hyper-inflation here we come! - time to get out those flares, were in for a 70's revival

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I do not see Brown hiking any time soon despite growing inflation. He must follow the Fed and it looks like Ben is done:

http://www.bloomberg.com/apps/news?pid=206...=worldwide_news

Bernanke said the economy is ``in a period of transition'' as consumer spending slows. Gross domestic product expanded at an annual rate of 5.6 percent in the first quarter and will probably cool to 3.25 percent to 3.5 percent this year and 3 percent to 3.25 percent in 2007, according to Fed forecasts published today.

My bet is the HPC in the US will slow the US economy sufficiently for a mild recession which should translate to the same + in the UK. Liquidity is draining slowly due to the Japanese moves and that will tighten credit of its own accord. The majority of borrowers are maxed out and any further rises in house prices will be in the minds of the EAs rather than in the market which will react to a slowly economy of its own accord. Further, the declining numbers of employed will filter into the economy slowing spending further.

I would be careful of irrational exhuberance in the stock marklet right now as the fundamentals that caused the decline are still there: global asset bubbles, recessionary trends in the US, higher rates coming from Asia, end of cycle economics.

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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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