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The Masked Tulip

'we Won't Slash Rates,' Says Bank Governor King As He Warns Inflation Could Hit 3%

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Mr King warned that households would come under pressure this year as wages failed to keep up with soaring costs of food, petrol, and household energy bills.

He said: "As a nation, our standard of living is going to rise much less quickly than if these price rises had not increased."

But he stressed that the Bank's Monetary Policy Committee was focused on the risk of heightened inflation expectations feeding into wage demands, adding: "We can't afford to go back to the 1970s or early 1980s."

The Governor's comments on the credit crunch came as he met MPs to discuss the Bank's quarterly inflation report, which was published last month.

Figures last week showed the official cost of the living - measured by the Consumer Prices Index (CPI) - reached a nine-month high of 2.5 per cent during February.

The Bank is charged with keeping CPI pegged to 2 per cent and Mr King will be forced to write an open letter to Chancellor Alistair Darling if inflation creeps more than 1 per cent above the target.

Last month, he said a letter to the Chancellor during 2008 was "odds-on" as a weakened pound, soaring oil and food costs, and rising household energy bills combine before growth is slowed and prices are brought back into check.

Mr King said today that even if commodity prices remained at their present high levels, the Bank's central projection was for inflation to fall back towards the 2 per cent target later this year.

http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

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odds on as in i can't do my job as in the letter doesn't matter as in at all costs keep the house prices high think of the children!!!

doubt that's kings fault though, he's just a puppet.

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Surely now it doesn't matter what they do with the rates. In the US of States they've slashed and what has it achieved?

Slash and be damned BoE - the whole economy is going to hell in a hand-cart and no amount of fettling with a 'rate' is going to stop this tsunami from flattening everything in its path.

I'm naturally bearish I think but in the last few weeks I've been afflicted with the 'be careful what you wish for it may just come true' virus. Now I never wanted financial armageddon. WHen I joined HPC many years ago (blimey - years!) all I wanted was for lending to calm down and for house prices to correct so as to avoid a bubble. The BoE in collusion with Labour and the media have created a massive bubble and this is bursting.

I am actually quite worried about the way things are going - we're going to have our cake (HPC) just like we wanted but the cake is now wired up to the mains.

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Guest Charlie The Tramp
I am actually quite worried about the way things are going - we're going to have our cake (HPC) just like we wanted but the cake is now wired up to the mains.

No problem, safety will ensure the earth leakage trip activates. :)

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Surely now it doesn't matter what they do with the rates. In the US of States they've slashed and what has it achieved?

Slash and be damned BoE - the whole economy is going to hell in a hand-cart and no amount of fettling with a 'rate' is going to stop this tsunami from flattening everything in its path.

I'm naturally bearish I think but in the last few weeks I've been afflicted with the 'be careful what you wish for it may just come true' virus. Now I never wanted financial armageddon. WHen I joined HPC many years ago (blimey - years!) all I wanted was for lending to calm down and for house prices to correct so as to avoid a bubble. The BoE in collusion with Labour and the media have created a massive bubble and this is bursting.

I am actually quite worried about the way things are going - we're going to have our cake (HPC) just like we wanted but the cake is now wired up to the mains.

Absolutely. Merv knows that cutting rates has no effect, and just stitches up the prudent.

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Slash and be damned BoE - the whole economy is going to hell in a hand-cart and no amount of fettling with a 'rate' is going to stop this tsunami from flattening everything in its path.

I am actually quite worried about the way things are going - we're going to have our cake (HPC) just like we wanted but the cake is now wired up to the mains.

I tend to agree somewhat, I'm contemplating buying myself half a dozen BTLs to help keep the party going.

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Yeah sod slashing rates, not like the banks will pass on any rate cuts unless they are contractually obligated to, and there's a mountain of bad debt parked in the channel islands that needs to disapear before we can re-open the credit taps.

"MORAL HAZARD"?

Edited by Yoss

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No problem, safety will ensure the earth leakage trip activates. :)

I like this cake analogy now! Trying to work out what a cakey trip-switch would taste like.

"Cooking doesn't get any harder than this" as they'd say on Masterchef.

Seriously though - I'm not an economist - HOW is it I saw this coming in 2004 then went looking for a site like HPC to discuss my gut feeling? I am not a genius but I have a bit of horse-sense - why didn't the trained economists march in London about this? What is the POINT OF ALL THEIR TRAINING IN THE LS BLEEDIN' E?

Edited by 29929BlackTuesday

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I tend to agree somewhat, I'm contemplating buying myself half a dozen BTLs to help keep the party going.

...the further the rates fall the longer the party will continue, we will then be too drunk to realise that long term the only way rates can go is up, repay while we have a chance to make hay. ;)

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...the further the rates fall the longer the party will continue, we will then be too drunk to realise that long term the only way rates can go is up, repay while we have a chance to make hay. ;)

Falling rates will make no difference though will it? It's made no difference in the US has it? Made it worse if anything.

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No problem, safety will ensure the earth leakage trip activates. :)

No, just an MCCB. We are going to get a hell of a shock before it trips, IMHO.....

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Falling rates will make no difference though will it? It's made no difference in the US has it? Made it worse if anything.

It has held a bad situation at bay.

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So what's our best guess now - after King's statement today - where BOE rates are going over the next 12 months. In a year's time what will the BOE rate be? Higher than today? Lower? The same more or less?

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Friends of mine still say to me that " the Government (BoE) won't let house prices crash".

Forcing this HPC is beginning to become an uphill struggle.

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TBH he'll just do as he's fukcin told by his lords and masters, everything else is just puff & air. Bankers will be swanning into his office telling him how it is, they are in the win win from making a complete mess..."C'mon Merv what you gonna do? You either buy up all our toxic shite, or crash the economy and society with it, sort it OK? Knighthood and more honours will be worth fukc all without a job like Blairs in five years, and you'll get both for sorting this. "

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Seriously though - I'm not an economist - HOW is it I saw this coming in 2004 then went looking for a site like HPC to discuss my gut feeling? I am not a genius but I have a bit of horse-sense - why didn't the trained economists march in London about this? What is the POINT OF ALL THEIR TRAINING IN THE LS BLEEDIN' E?

I think that's what 95% of this site's users are thinking... how did we know something was badly wrong, but the great and the good (plus their economists and accountants) couldn't see this coming.

Ineptitude or conspiracy on a grand scale. Neither possibility fills me with happiness.

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Yeah sod slashing rates, not like the banks will pass on any rate cuts unless they are contractually obligated to, and there's a mountain of bad debt parked in the channel islands that needs to disapear before we can re-open the credit taps.

"MORAL HAZARD"?

Slashing rates into the 1 to 2% range would probably lead to higher overall lending costs as the pound would fall in value (higher import costs, hence higher CPI/RPI, and although that isn't inflation per se, banks wouldn't be falling over themselves to lend at less than RPI) plus if sterling became very unattractive then some foreign sterling holdings might be sold off, in which case some of that extra money supply might find its way back to the UK, creating monetary inflation (inflation being the excess of the money supply over and above the increase in goods, and that which goes offshore and stays offshore). So those on trackers would be ok for a bit, then have a big jolt moving onto new deals. Plus there is an ongoing repricing of risk. There is probably a 'sweet spot' for IRs - low enough that debt servicing is less of a strain, but not so low that the currency and monetary effects become dominant. I don't have a clue what that rate would be, and it probably varies with time.

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I think that's what 95% of this site's users are thinking... how did we know something was badly wrong, but the great and the good (plus their economists and accountants) couldn't see this coming.

Ineptitude or conspiracy on a grand scale. Neither possibility fills me with happiness.

Eddie George knew the outcome from 2001 onwards, so did those in charge of the global purse strings. The rest is just the worst case of method acting, think Colin Powell and his pre google earth sattelite shots of Saddam's wmd... <_<

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I think that's what 95% of this site's users are thinking... how did we know something was badly wrong, but the great and the good (plus their economists and accountants) couldn't see this coming.

Ineptitude or conspiracy on a grand scale. Neither possibility fills me with happiness.

And trained economists do what, exactly, for a living?

They advise their clients how to make money- They see everything is wrong, but they talk the situation up for as long as they need, allowing their clients to bail out at an opportune moment.

I mean- what caused the market for money to seize in August 2007 in particular.

Economists were saying beforehand all was tickateeboo. Then it stopped. Was it people bailing on mass?

I have no idea, but something kicked it off.

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So what's our best guess now - after King's statement today - where BOE rates are going over the next 12 months. In a year's time what will the BOE rate be? Higher than today? Lower? The same more or less?

My Best guess BOE target for inflation basically moved to 3%. Too many voters with too much debt.

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Slashing rates into the 1 to 2% range would probably lead to higher overall lending costs as the pound would fall in value (higher import costs, hence higher CPI/RPI, and although that isn't inflation per se, banks wouldn't be falling over themselves to lend at less than RPI) plus if sterling became very unattractive then some foreign sterling holdings might be sold off, in which case some of that extra money supply might find its way back to the UK, creating monetary inflation (inflation being the excess of the money supply over and above the increase in goods, and that which goes offshore and stays offshore). So those on trackers would be ok for a bit, then have a big jolt moving onto new deals. Plus there is an ongoing repricing of risk. There is probably a 'sweet spot' for IRs - low enough that debt servicing is less of a strain, but not so low that the currency and monetary effects become dominant. I don't have a clue what that rate would be, and it probably varies with time.

Great post Wlad.

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Friends of mine still say to me that " the Government (BoE) won't let house prices crash".

Forcing this HPC is beginning to become an uphill struggle.

i get this claptrap too... so in '89 the government just said ah sod it, nowt we can do.

:unsure:

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I think that's what 95% of this site's users are thinking... how did we know something was badly wrong, but the great and the good (plus their economists and accountants) couldn't see this coming.

I think it is more that governments have relatively few levers to pull to affect things, and the levers that do have a big delay in effect so overcontrol and overshoot is very easy to effect, especially given all the levels of feedback in the system. It's even more difficult now with global connectedness as increasingly what policies a country on the other side of the world sets makes a bigger and faster difference.

A problem deferred is one that is probably seen as one that might be avoided as conditions might change.

Even now, though, there are big debates (even amongst the economic cogniscenti) between those who think we are going to have delation and those who think that hyperinflation is going to happen. Those that predict a continued commodity boom or those that predict a commodity bust. So I am not sure what is going to happen is clear, or to what extent what has happened could have been predicted in detail. For example you have Greenspan saying now that it was inevitable, but at the time (2001-5) he was trying to delay it, in the hope that it wasn't inevitable...

It might be a partly chaotic system with cusps (which also doesn't preclude things going in cycles).

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  • 296 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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