Tuesday, Jun 13, 2006

Are UK interest rates set to stay put?

TimesOnline: King strengthens expectations that rates will stay put

This is a very subjective piece by Gary Duncan the economics editor of the Times where he concludes that Mervyn King's comments indicate that there will be no movement in UK interest rates. It would appear that the financial markets do no share Gary Duncan's view. It's worth a read but hard to understand how Duncan reaches his conclusion.

Posted by denzil @ 12:46 PM (512 views)
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1. Paul said...

If the government decides to stop targetting inflation then he could be right.

As we've seen, when the figures stop adding up to what you want, it's easier to start saying "let's ignore the figures" than to say "what's the problem here?".

I wouldn't put it past the BofE to start ignoring inflation at the expense of savers! Punishing financial prudence and rewarding financial recklessness on this scale is not beyond imagination.

Tuesday, June 13, 2006 01:46PM Report Comment

2. Twopper said...

Is it me or does this article imply the complete opposite!!

Tuesday, June 13, 2006 04:14PM Report Comment

3. denzil said...

Paul said:
>>If the government decides to stop targetting inflation then he could be right.

I think Uncle Tom implied this yesterday. I fail to see the advantage letting go of inflation. Regardless of political persuasion containing inflation could IMHO provide greater stability but only on the condition that the economy is not saturated with money which allows bubbles to form.

One point though is that if inflation is allowed to run amok then this may bail out the BTL. I think it is now odds-on cert that the housing market will suffer falls in value, even the BBC were talking about it today. Now if inflation and subsequent wage inflation grows sharply and house prices stagnate then affordability will improve. This is good for the FTB but not of much good for the STR because prices will remain the same but IR's will be higher but obviously wage inflation against a stagnating market is good for both the FTB and STR.

I'm just throwing random thought in here so hopefully they are not too off the wall.

I don't buy the "stop targetting inflation" bit as we operate on a global scale these days and high inflation would make us far less competive.

However, whichever way you look at things a damn fine mess is starting to appear, a mess which the chancellor should to a large extent take responsibility for.

Tuesday, June 13, 2006 08:06PM Report Comment

4. Afinemess said...


It's not just you. I saw the same speech reported in the FT, and they took the line that King was warning about inflationary pressures in the economy and the potential for rate rises.

Tuesday, June 13, 2006 08:45PM Report Comment

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