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Bank Attacked Over Rate Mistakes

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Guest muttley

Bank attacked over rate mistakes

The Bank of England will be forced to raise interest rates higher for longer because of its caution in fighting resurgent inflation, Britain's biggest investor has warned.
James Carrick, investment strategist at L&G, said: "The slower the MPC acts, the higher interest rates might ultimately need to peak." He contrasted the Bank's timidity with its aggressive hikes in 2004, when it raised rates three times in four months.

The interest rate cut in August 2005 is now widely seen as a mistake. To be fair to the governor of the BoE he warned against it. Now IR's will have to go even higher thanks to the MPC's profligacy.

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Bank attacked over rate mistakes

The interest rate cut in August 2005 is now widely seen as a mistake. To be fair to the governor of the BoE he warned against it. Now IR's will have to go even higher thanks to the MPC's profligacy.

When L&G have something to say I tend to listen. Unlike Blanchflower of the BoE, who likes to write weird essays and commute across the ocean at taxpayers' expense, L&G are actually doing something useful for the UK. It seems that 6% is a given.

I bet L&G would love to see the BoE and Gordon Brown removed from power considering how much damage and regulation they've applied. ;)

Edited by Xurbia

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Gross negligence--resignation would be the right thing to do. After that, the BoE needs to be made independent of Brown's appointees and the Treasury (same).

http://www.telegraph.co.uk/money/main.jhtm...17/cnbank17.xml

...../

James Carrick, investment strategist at L&G, said: "The slower the MPC acts, the higher interest rates might ultimately need to peak." He contrasted the
Bank's timidity
with its aggressive hikes in 2004, when it raised rates three times in four months.

"Timidity" about sums it up. To beat inflation you need to get ahead of the inflation curve. Merv and the muppets are still well in accommodative territory and causing inflation to rise.

http://www.telegraph.co.uk/money/main.jhtm...7/cconway17.xml

Analysis: Has the Bank lost control of inflation?
By Edmund Conway, Economics Editor
Last Updated: 2:30am BST 17/05/2007
Throughout the press conference in the Bank of England yesterday morning, one question was hanging ominously in the air: is the Monetary Policy Committee now playing catch-up with inflation?
It’s a question echoing around the City at the moment, and with some reason. Whereas late last year the MPC was indicating that interest rates at 5pc would be enough to keep inflation close to its 2pc target, the message that came out yesterday was that 5.75pc is now the appropriate level.

With their current head in the sand approach to inflation we can expect IR in double digits within a year.

Edited by Realistbear

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I believe the BoE have done the bears a favour, any chance of supervising a soft landing looks increasingly remote.

6% IR and I think panic will set in.

Bank attacked over rate mistakes

The interest rate cut in August 2005 is now widely seen as a mistake. To be fair to the governor of the BoE he warned against it. Now IR's will have to go even higher thanks to the MPC's profligacy.

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Guest muttley
"Timidity" about sums it up. To beat inflation you need to get ahead of the inflation curve. Merv and the muppets are still well in accommodative territory and causing inflation to rise.

Back in August 2005 no-one said the bank were being timid. In fact there was a clamour for rate cuts from the CBI if I remember correctly. What a pity Mr King didn't show more leadership when he clearly opposed the decision to cut.

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Guest grumpy-old-man
I believe the BoE have done the bears a favour, any chance of supervising a soft landing looks increasingly remote.

6% IR and I think panic will set in.

I think so as well.

If they had put rates up in 2005 & gradually raised them, then they might have got a softer landing (although I still don't think a soft landing would ever had been achieved).

anyway, we now know the hpi boom was fuelled deliberately, I think this single admission was huge in terms of trust.

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I believe the BoE have done the bears a favour, any chance of supervising a soft landing looks increasingly remote.

6% IR and I think panic will set in.

It's not just that, but expectations of future rises in the mind of the public. The MPC have painted themselves into a corner, are they going to follow their remit and contain inflation below target or protect the housing market? They can no longer do both.

Edited by BuyingBear

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When L&G have something to say I tend to listen. Unlike Blanchflower of the BoE, who likes to write weird essays and commute across the ocean at taxpayers' expense, L&G are actually doing something useful for the UK. It seems that 6% is a given.

I bet L&G would love to see the BoE and Gordon Brown removed from power considering how much damage and regulation they've applied. ;)

Blanchflower commutes across the ocean every month. Just think of all that destruction to the environment. Surely Gordenrons appoitment of Blanchflower will have increased global warming significantly, what a PR mistake that could potentially be.

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I believe the BoE have done the bears a favour, any chance of supervising a soft landing looks increasingly remote.

6% IR and I think panic will set in.

Wow.

Never thought I'd hear "6%" referred to in the same sentence as "panic [level]".

Are you watching, IFAs? Better get some superglue around that mail flap.

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Don't panic everyone. Casual observer will be along in just a mo to reassure everyone that IRs HAVE peaked for this cycle (of course the cycle only lasts until the next rise) :P

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Don't panic everyone. Casual observer will be along in just a mo to reassure everyone that IRs HAVE peaked for this cycle (of course the cycle only lasts until the next rise) :P

And don't forget the other bulls who at the same time will be goading everyone else for calling the top too early. ;)

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Guest pioneer31
Don't panic everyone. Casual observer will be along in just a mo to reassure everyone that IRs HAVE peaked for this cycle (of course the cycle only lasts until the next rise) :P

Funny how CO, Europa, Tenroom etc jump all over some threads and are completely absent from others (eg the CPI figures thread brought them all out of the woodwork as it could have been interpreted in a bullish way, albeit very slightly)

You'l not find them on this one.

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I hope so, I'm looking forward to a 10% payrise.

Lol, you mean "I am looking forward to having my Job Outsourced" or "I am looking forward to a real terms pay cut".

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I believe the BoE have done the bears a favour, any chance of supervising a soft landing looks increasingly remote.

6% IR and I think panic will set in.

I agree. 6% will get the sheeples nuts tightening.

I just don't know if the ecconomy is going to sustain it, especially if the USA actually puts a rate cut in.

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It's not just that, but expectations of future rises in the mind of the public. The MPC have painted themselves into a corner, are they going to follow their remit and contain inflation below target or protect the housing market? They can no longer do both.

Agreed. However, the MPC are also now trying to manage the currency as well - to try and prevent Sterling collapsing. The FX market did not like the fact that the BoE did not put rates up 0.5% last week.

If Mr King is willing to admit they are looking at raising rates another 0.25% - why not do it last week?

The problem is that secondary inflation effects are now kicking in with all sectors of the manufacturing/service economy now raising prices aggressively. Surely enormous pressure is going to come in from private and public sector employees to play catch up with wages. Something has to give. I fear that interest rates will have to stay higher and for longer than anyone planned and that will cause a lot of pain especially in asset markets.

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Lol, you mean "I am looking forward to having my Job Outsourced" or "I am looking forward to a real terms pay cut".

Pay deals this year are pretty good in a lot of places. That implies outsourcing is further away than ever, because if there was any possibility of businesses saving money by doing so, they'd be holding wages flat while they arranged the outsourcing.

While prices are set at the margins etc. the fact is that even in the worst scenario imaginable, there will still be loads of people with well paid jobs here. It's not going to be something that affects everyone.

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Guest Bart of Darkness
The Bank of England will be forced to raise interest rates higher for longer because of its caution in fighting resurgent inflation, Britain's biggest investor has warned.

Exactly what several savvy posters on here said would happen (I wasn't one of them I hasten to add).

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