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Bank Warns Of More Economic Risks

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The only temporary nature of inflation that the BOE understands is the crossing of fingers and hoping people forget the inflation that happened last year when the numbers fall out of the stats.

We've been told it has been temporary before and all the soothing words have turned out to be nothing but a pack lies, as the MPC drop rates to spur on yet more inflation time and again.

"Its implication for policy depends on whether people recognise the temporary nature of the pick-up in inflation," she said.

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I was going to open a thread on this myself. I am annoyed. NOW Ms "cut IR" Lomax warns that "the outlook for the UK economy in 2008 has "changed dramatically", WE, on HPC, a forum made by bloody amateurs, have been saying this for at least 18 months.

At this point, they might as well employ us at the BofE and get rid of these useless muppets! :angry:

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She said that UK inflation will 'rise sharply in the near term' while the economy will grow 'at below-trend rates over the next two years' even if the Bank cuts interest rates dramatically. This highlights the MPC's dilemma as it tries to balance the risk of runaway inflation with the need to boost economic growth.

Lomax, in charge of monetary policy at Threadneedle Street, said: 'A temporary pick-up in inflation, by itself, does not mean the committee needs to tolerate a significant weakening in demand.

'But if inflation expectations appear to be persistently elevated, the committee will need to tolerate more slack to keep inflation on target. And that means it will have less scope to respond to slowing demand - the risk posed by the current turmoil in financial markets.'

http://www.thisismoney.co.uk/news/article....e_id=2&ct=5

Angst = do I put my money into fixed rate bonds or into variable accounts! So much uncertainty!

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Have they not yet grasped the fact that every prediction they make about inflation turns out to be completely and utterly wrong? In 2005 they told us that inflation, two years out, would be easing. 18 months later, Merv had to write the letter.

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What Rachel Lomax really meant to say was:

Honestly, inflation really is only 2.1% and that teensy weensy little 0.1% blip is only a temporary rise above the inflation target, so please don't go and demand higher wages to keep up with the 15% inflation that you may perceive - it's an illusion - honest. And if inflation DOES continue to rise, why, it will be YOUR fault, you dumb populace, for asking for wage rises to match inflation. You see, it's your inflationary EXPECTATIONS and UNREASONABLE DEMAND for wages to keep up, that create inflation, nothing to do with the B of E or government policy. So be good children and DON'T ASK FOR A B****Y RISE!

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The Bank of England's deputy governor has said the outlook for the UK economy in 2008 has "changed dramatically". Rachel Lomax said there was uncertainty over the full impact of "the largest ever peacetime liquidity crisis".

Pah! What does she know? Check out the quote in my signature from the world's greatest economist, David Smith:

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I assume David thinks inflation is on the up then?

I'm not sure that 'thinks' is the correct verb to use for David Smith. Anyway, inflation has about as much relevance to prices as the result of a Mongolian polo match has to last saturday's ten pin bowling match in Manchester. Or something.

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The US recession just inched a little closer......

Feb. 26 (Bloomberg) -- Consumer confidence in the U.S. fell more than forecast in February to the lowest level since the start of the Iraq war as the labor market cooled and the economy faltered.

The Conference Board's index of confidence decreased to 75, the lowest since March 2003, from a revised 87.3 in January, the New York-based group said today. The employment outlook weakened and expectations for the next six months dropped to the lowest level since January 1991, the start of the Gulf War.

Americans are worrying more about the economy because the housing market is in its third year of a slump, employment has dropped, and gasoline and food prices are elevated. That may threaten consumer spending, which already has slowed, and further push down economic growth.

``With so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase,'' said Lynn Franco, director of the Conference Board's consumer research center, in a statement.

Treasury notes extended gains after the report, while the dollar remained weaker against the euro.

Economists forecast the Conference Board's measure would fall to 82 from a previously reported 87.9, according to the median of 66 forecasts in a Bloomberg News survey. Estimates ranged from 76.3 to 87.

Jobs Outlook

The Conference Board's measure of present conditions dropped to 100.6 in February from 114.3 the prior month. The gauge of expectations for the next six months decreased to 57.9 from 69.3, the report showed.

The share of consumers who said jobs are plentiful declined to 20.6 percent, from 23.8 percent last month. Those saying jobs are hard to get increased to 23.8 percent from 20.6 percent a month ago.

The proportion of people who expect their incomes to rise over the next six months decreased to 17.0 percent from 18.1 percent. The share expecting more jobs dropped to 9 percent from 10.5 percent.

``The consumer's been in a tough spot for a while now,'' said Ryan Reed, an economist at National City Corp. in Cleveland, who forecast consumer confidence would fall to 76.3, the lowest projection in the Bloomberg News survey. ``The years of elevated oil prices and weakening housing market are starting to catch up in the sentiment numbers.''

Separate reports today raised concerns about inflation and a weakening housing market.

Inflation Signals

Prices paid to U.S. producers rose 1 percent in January, more than twice as much as forecast, the Labor Department said. Home prices in 20 U.S. metropolitan areas fell 9.1 percent in December, the most on record, the S&P/Case-Shiller home-price index showed.

The U.S. lost jobs for the first time in four years last month. The Labor Department is scheduled to release February's employment report on March 7.

This month weekly initial jobless claims have remained elevated and the number of Americans continuing to stay on benefit rolls reached the highest level in more than two years, signaling that weakness in the labor market continues.

Outside of the labor reports, other releases are showing weakness in the housing market is spreading to other parts of the economy. The Institute for Supply Management's non- manufacturing index fell to 41.9 in January, the lowest level in more than six years, and the Federal Reserve Bank of Philadelphia's general economic index contracted the most in seven years this month.

Fed's Response

Federal Reserve officials last month cut their forecast for U.S. growth this year to a range of 1.3 percent to 2 percent, from 1.8 percent to 2.5 percent predicted in October. Two members of the National Bureau of Economic Research's business cycle dating committee, the panel charged with dating U.S. economic cycles said last week that it's too early to decide whether the U.S. is in recession.

Fed policy makers last month lowered their benchmark rate by 1.25 percentage point to 3 percent, including a three- quarters-of-a-point cut in an emergency meeting on Jan. 22. Central bankers are scheduled to next vote on the direction of interest rates March 18.

Higher energy and food bills also are hurting consumers' outlooks and their ability to spend on non-essential items. The amount of Americans must spend each month on debt service, housing, medical care, food and energy rose to 66.9 percent of their total spending in December, the highest since record- keeping began in 1980, according to Bloomberg figures.

Spending Curtailed

Consumers are scaling back spending. Retail sales excluding automobiles and gasoline were unchanged in January, the Commerce Department reported on Feb. 13.

In December, consumer spending, which makes up about 70 percent of gross domestic product, grew at the slowest pace in six months. The government is scheduled to release its January report on spending on Feb. 29.

Alice

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Very interesting... especially that it is Lomax who is quoted... she's been one of the most doveish MPC members (as far as I'm aware) - and it is interesting that she's resigned to recession... talking about higher rates rather than rate cuts.

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Everyone should subscribe to the BOE email system (if they haven't already) , this speech came out at 11:58am today. http://www.bankofengland.co.uk/publication...8/speech337.pdf

Also interesting http://www.bankofengland.co.uk/statistics/...02/sn200802.htm

1. Northern Rock (clarification)

Notwithstanding the Government’s decision to nationalise Northern Rock and the recent ONS announcement regarding the classification of Northern Rock within public finances, reporters should note that for the reporting of statistical returns to the Bank of England, Northern Rock should continue to be classified as a UK Bank. Northern Rock’s UK-resident securitisation vehicles should continue to be classified as “financial corporations (including unlimited liability partnerships) other than monetary financial institutions”.

If you have any queries relating to classification please contact our Help Desk on 020 7601 5360.

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Soon and very soon we are going to see headlines like these:

http://biz.yahoo.com/ap/080226/home_prices.html

U.S. home prices dropped 8.9 percent in the final quarter of 2007 compared with a year ago, Standard & Poor's said Tuesday, the steepest decline in the 20-year history of its housing index.

http://biz.yahoo.com/ap/080226/foreclosure_rates.html

The number of homes facing foreclosure jumped 57 percent in January compared to a year ago, with lenders increasingly forced to take possession of homes they couldn't unload at auctions, a mortgage research firm said Monday.

Wel, not quite like those. Worse. Much worse.

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Aiso the CBI said today that retail prices are rising at their fastest rate since Aug 1996 but,but,but.

Did they do their usual, and use this to call for interest rates to be slashed to 0.00001% and for two billion more migrant workers be allowed into Britain?

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Hey whats going on? All the economists I have seen on the news lately have said we were looking at three to four rate drops this year as a dead cert.

Surely they wont rise? This is not in the script!! Blimey they better cover some more doom and gloom stories to pressure the Bank of England.

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I think the situation is quite simply this.

1. Inflation is on the rise and every economist knows it.

2. The banks are broke and most economists know this via the grapevine.

3. Vested interests - economists, bankers, central banks, etc - are calling for rate cuts in order to allow the banks to recoup funding by offering peanut IRs to savers whislt allowing them to keep all their BTLs, MEWs et al heads just above water.

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Did they do their usual, and use this to call for interest rates to be slashed to 0.00001% and for two billion more migrant workers be allowed into Britain?

Funny that, as it seems the future of interest rates lies in the migrant's hands. They either push up their pay as general inflation is soaring

and they'll have no option, which will lead to higher interest rates and falling house prices, or, they'll all head home as they will not be able

to survive here on the peanuts they're currently paid, which will leave the btl brigade in a bit of a pickle as they'll have no one to rent their

pokey riverside aprtmenets to which is likely to lead them all to jump ship and flood the housing market with cheap properties which again

will lead to falling house prices. Bless.

Edited by time 2 raise interest rates

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I was going to open a thread on this myself. I am annoyed. NOW Ms "cut IR" Lomax warns that "the outlook for the UK economy in 2008 has "changed dramatically", WE, on HPC, a forum made by bloody amateurs, have been saying this for at least 18 months.

At this point, they might as well employ us at the BofE and get rid of these useless muppets! :angry:

Exactly, something fishy going on here I think! <_<

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How much does she get paid to state the bleeding obvious?

In my rather deluded mind I was under the impression that she is at least partly responsible for preventing exactly the kind of economic conditions that she is describing.

I would love to know what they do at their cosy monthly meetings because on this evidence it obviously isn't much.

The Bank of England need to try just a little bit harder in order to convince us that they are actually in control of the economic levers.

I try not to think in conspirital terms but I'm left with no option.

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How much does she get paid to state the bleeding obvious?

In my rather deluded mind I was under the impression that she is at least partly responsible for preventing exactly the kind of economic conditions that she is describing.

I would love to know what they do at their cosy monthly meetings because on this evidence it obviously isn't much.

The Bank of England need to try just a little bit harder in order to convince us that they are actually in control of the economic levers.

I try not to think in conspirital terms but I'm left with no option.

I believe the Bank of England mpc is now largely an irrelevance - larger forces are now playing out the situation. If any of those employed at the BoE were to read this thread they should be flattered at the time some people have for them. That's all I have to say. I'm off.

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  • 293 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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