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Mpc Must Not Rush Into "damaging" Interest Rate Rises

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http://news.bbc.co.uk/1/hi/business/6910518.stm

Bank must not 'squeeze economy'

The Bank of England's monetary policy committee (MPC) faces a balancing act, an influential forecast group says.

On Monday, the Ernst & Young Item Club will say the strong housing market must be watched, but the MPC must not rush into "damaging" interest rate rises.

It is predicting strong GDP growth of 2.9% in 2007 and 2.5% for 2008, and expects interest rates to rise further.

But it warns the MPC must be forceful, but not "squeeze the economy too hard" so that it jeopardizes exports.

'Acted forcefully'

The Item Club is an economic forecasting group which uses Treasury data and economic models in its research.

Item chief economist Peter Spencer says: "Everyone is getting worried about monetary growth and interest rates.

"But the economy is not going to take a tumble, particularly with the global picture so firm.

"The Bank has acted forcefully, but it now needs to be careful not to squeeze the UK economy too hard.

"The MPC needs to rebalance the economy and cool the housing and financial markets, without jeopardizing exports."

The club expects interest rates to move up to 6% and then stabilise, which, it says, should be enough to halt the excesses in the housing market.

It also says that gas and electricity are now bringing down CPI inflation, which is likely to fall back towards the 2% target this autumn, giving the Bank breathing space.

Roll on autumn and let's see if they're right about CPI.

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http://news.bbc.co.uk/1/hi/business/6910518.stm

Roll on autumn and let's see if they're right about CPI.

Yeah, like they've been right about any of their predictions over the past 2 years.

HPC forum members have been far more accurate with their inflation predictions than the BoE! Take a look back 18+ mths and see how money supply was discussed, only recently this has been mentioned in the MPC's minutes!

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I can't see why gas and electricity prices distorting CPI is a reason to leave rates unchanged.Taking those out of the equation we would be close to letter writing territory.Surely with core inflation at its highest level since March 1997,this is the time to act aggressively not use domestic fuel deflation as a ''breating space''.

The credibility of the 2% target is wearing thin.I think the MPC should have to write to the Chancellor if they have not achieved the target for over a year(as now),otherwise you can get this permanent bias of running over.Surely running permanently over but say not hitting 3.1% is going to put you more off target in the long run than a quick 3.1% spike which is quickly resolved back to 2%.

I feel really angry that certain members are unwilling to resolve the bias.I tend to wonder if Rachel Lomax's finances resemble Rosie Millards.What other explanation could there be?

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I can't see why gas and electricity prices distorting CPI is a reason to leave rates unchanged.Taking those out of the equation we would be close to letter writing territory.Surely with core inflation at its highest level since March 1997,this is the time to act aggressively not use domestic fuel deflation as a ''breating space''.

The credibility of the 2% target is wearing thin.I think the MPC should have to write to the Chancellor if they have not achieved the target for over a year(as now),otherwise you can get this permanent bias of running over.Surely running permanently over but say not hitting 3.1% is going to put you more off target in the long run than a quick 3.1% spike which is quickly resolved back to 2%.

I feel really angry that certain members are unwilling to resolve the bias.I tend to wonder if Rachel Lomax's finances resemble Rosie Millards.What other explanation could there be?

Couldn't you use the Freedom of Information Act to force MPC members to divulge their property ownership status. If they have BTL investments, or second homes, and/or high levels of debt - well voting for higher rates would be like turkeys voting for Christmas.

We should be told.

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