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Bank Of England Base Rate

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The Bank of England has an interesting decision to make tomorrow. With inflation rising because of the price of food and oil an increase in the base rate would look the most likely.

But with house prices falling, job losses and serious pressure on the retail market can the BoE let these get worse even though a base rate rise will probably have no affect on the soaring price of food and oil?

By prediction is that they will increase the base rate to 5.25% and things will get worse for home sellers and people on the breadline.

Agree - Disagree what do you think?????

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unchanged

i dont see rate rises just now even though thats what i believe should happen. in their view the BoE dont see the point in bringing inflation back to 2% and increasing the risk of recession. they would rather CPI goes out to 4% at the moment

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Hard to call... those who were hoping for cuts, now seem to be begging for a hold. I'm thinking they may rise a quarter point though. I'll sit on the fence with my legs dangling over the side for a rise! ;)

EDIT: oops! I had cut in there! haha! :blink:

Edited by Traktion

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Interesting to see that no one as of yet has gone for a cut (apart from some dangling legs - and within minutes the legs have crossed over to rise!!!).

I do think the BoE is really between a 'Rock and a very Hard place' but whatever they don't see much change in the forth coming months - house prices will continue to fall and jobs will go (particularly anything linked to construction and retail)

On a side note getting a mortgage is not getting any easier - has there been any money lender relaxing there position on lending money and are realistic on what a person can afford? Are there any mortgages available with an APR of 5.5% or there abouts for a LTV of 90% or even 80%.

I remember getting a mortgage in 2003 with an APR of 4.5% - them were the days!!!!!

Edited by FTBelfast

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AFAIK the BoE remit is to control inflation. Therefore, the base rate should be going up to control inflation.

However, has everyone noticed how much talk there is of a recession in the news this week? So, to prevent a recession (which it is not possible to prevent) there will be loud crys to cut base rates.

Rock > BoE < Hard place.

In my opinion, rates should be going up to protect the wider economy from inflation. Not coming down to help the financial and housing sectors. They are toast anyway.

Though I really doubt if they will do anything until they are forced to. So I think it will be a 'hold' decission.

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I think they'll hold for now and reduce later in the year or early next year.

Inflation seems to be fueled by food/oil prices, i can't see how putting up the base rate will have an effect on either.

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If we are talking about inflation, the understanding what inflation actually is, is important:

A link to the full book by Henry Hazlett (about 5MB)

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I think they'll hold for now and reduce later in the year or early next year.

Inflation seems to be fueled by food/oil prices, i can't see how putting up the base rate will have an effect on either.

a common misconception. Rises in food/ oil prices are the effect of inflation not the cause

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AFAIK the BoE remit is to control inflation. Therefore, the base rate should be going up to control inflation.

However, has everyone noticed how much talk there is of a recession in the news this week? So, to prevent a recession (which it is not possible to prevent) there will be loud crys to cut base rates.

Rock > BoE < Hard place.

In my opinion, rates should be going up to protect the wider economy from inflation. Not coming down to help the financial and housing sectors. They are toast anyway.

Though I really doubt if they will do anything until they are forced to. So I think it will be a 'hold' decission.

Our economy is so dependant on the financial sector that anything over-zealous would cause meltdown.

I do agree with what you think should happen, but you know what is going to happen. Rabbits in headlights

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I saw Merv on the telly at Wimbledon on Sunday, sitting behind Bjorn Borg. His eyes were moving from left to right rather than up or down. I think this was a subliminal message for a hold ;)

Edited by Vespasian

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a common misconception. Rises in food/ oil prices are the effect of inflation not the cause

Does that mean if UK inflation is controlled (2% target) the food/oil prices would come down.

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Does that mean if UK inflation is controlled (2% target) the food/oil prices would come down.

The misconception is to do with definitions. Inflation in monetarist economics relates to growth in money supply, and too much money in the system looking for investment opportunities pushes up prices.

So if the central banks stopped pumping billions into the banking system this may help control the commodity prices. But then what would happen?

Edit monetarist

Edited by wayoutwest

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Does that mean if UK inflation is controlled (2% target) the food/oil prices would come down.

In a nutshell. yes. But look at it from the angle that the money in your pocket would be worth more. lower inflation rates do imply lower commodity prices

Also, the 2% target and inflation rate governments like to quote are fiddled.

m4.jpg

The problem is that most "stuff" is priced in dollars. So when you hear Gordo talking about a "global credit crunch" hes really saying "i dont want to upset the yanks"

And when Gordo talks about people wasting food, it will encourage this sort of thing Consumers get less bang for their buck

Look at the yanks m3 money supply (which they stopped reporting) and compare this to the fall in the dollar

sgs_m3.gif

post-9432-1215641082_thumb.jpg

post-9432-1215642448_thumb.png

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I can't remember the last surprise move in BoE interest rates or Euro rates for that matter. They make statements well beforehand to hint heavily what the decision will be. So this means no change tomorrow. I will be surprised, and happy, with a 0.25% rise.

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one for you Blofield

p.s. it will be a hold tomorrow.

A very good company. They have the right idea in their situation, import little, export lots.

Ironically there is a large proportion of the exported steel is going to china to build massive steel mills :lol:

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  • 395 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
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