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Jason

Head Of Cbi Warns Bank To Stay Its Hand On Interest Rates

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http://business.timesonline.co.uk/article/...p;attr=Business

THE Bank of England was cautioned against a premature increase in interest rates yesterday by a former member of its Monetary Policy Committee who now heads the CBI.
Richard Lambert warned the Bank that recent robust trends in high street activity might not last and that an increase in borrowing costs next month could undercut consumer demand.
The CBI's Director-General said that while its latest snapshot of high street conditions, out yesterday, painted a relatively rosy picture, "our feeling is that the current momentum is not going to persist".
Edited by Jason

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This really is pretty sickening. Either the MPC has a mandate to tackle inflation, or it doesn't. If it's job is to take account of all sorts of touchy-feely things like 'people are buying stuff now but they may stop soon because I can sense it' from a former member, then it's truly hopeless!

Anyway, I thought that, unlike the ECB and Bundesbank and Fed, it was established to look solely at inflation? (Or am I wrong?)

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Anyway, I thought that, unlike the ECB and Bundesbank and Fed, it was established to look solely at inflation? (Or am I wrong?)

Inflation and economic stability.

Edited by OzzMosiz

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Ben "Gentle Ben" Bernanke sees the US economy slowing and house prices in the non-froth zones heading for a soft landing which is why he may not hike IR further. If the US economy slows Europe will follow in which case it is unlikely Gordon will be pushing for a hike at his bank anytime soon.

THe problem for Gordon is that the UK economy has a rather large and very dangerous difference. Ben sees the "soft landing" for house prices over most of America where prices have risen by around 20% over thye past 5-7 years. However, his predecessor Alan "Big Al" Greenspan pointed out that areas where HPI had turned the market into froth would experience some pain as prices unwound. Al was pointing to the Coastal zones where prices have risen by around 120% over the same period. In the UK prices have risen by as much as 150% which means that the "Froth" is frothier and likely to experience excruciating agony.

The market cannot be beaten and the forces of economic equilibrium where prices are always returned to sustainable levels based on fundamentals means that the UK housing market will correct. What are sustainable levels? IMO, around 40% less than where they are today to bring PE ratios back down to ground to reflect actual affordability. IO loans and the ability to MEW to serve other debt is a time bomb and since a high proprtion of our market consists of unstable elements the correction will, once again, prove to be sharp, painful and long.

Watch Ben because what he says and does will be mirrored by Gordon and what happens in the "froth" US markets will happen here. In the Great Crash California led the way and it looks like doing so again.

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Richard Lambert warned the Bank that recent robust trends in high street activity might not last and that an increase in borrowing costs next month could undercut consumer demand.

The CBI's Director-General said that while its latest snapshot of high street conditions, out yesterday, painted a relatively rosy picture, "our feeling is that the current momentum is not going to persist".

Funny how growth is always "robust" the 2 weeks after MPC meet, then in the run up to the next meeting, all that record-breaking growth is "fragile"

The MPC are getting beyone a joke, at least some sections of the press [Express :blink: Telegraph] and public seem to be waking up to the fact

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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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