Thursday, Jul 27, 2006

Pressure mounting!

Reuters: Sterling holds near highs as rate rise talk mounts

Sterling held near the previous week's one-month highs against the euro after a run of strong economic data rekindled expectations for a hike in UK interest rates perhaps as soon as next month.

Posted by tyrellcorporation @ 11:34 AM (2930 views)
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1. tyrellcorporation said...

The BoE will still want to see more data before they act though...

Thursday, July 27, 2006 11:45AM Report Comment

2. paul said...

The BofE won't raise rates whatever data you thro at them showing the case for a rise.

The UK has always been parochial when it comes to interest rates as Black Wednesday showed. It will take another shock to bring UK rates to a more normal level - runaway inflation would do it.

Thursday, July 27, 2006 12:10PM Report Comment

3. waitingfor hpc said...

we have got runaway inflation in the uk.. in manufacturing anyway

Thursday, July 27, 2006 12:15PM Report Comment

4. Blindleadtheblind said...

a rise at the next meeting...never disappoint or suprise the money markets. To do that would put sterling under huge pressure very quickly. Something the BOE fears more than anything, more than slow growth or inflation, is that is not in control.

Thursday, July 27, 2006 12:19PM Report Comment

5. uncle chris said...

Now then .... as we all know inflation is just 2.9%. Don't worry about fuel prices, council tax, electricity, debt repayments shooting up, because as you well know, we all spend most of our money on cheap electronic goods. Everyone has at least 15 DVD players don't they. I guess what I'm trying to say is that the great facade that the UK economy is doing swimmingly - thankyou - will keep the heads of MPC members firmly stuck in the sand .... la la la .... we're not listening! Hmmm .... when did I become so cynical.

Thursday, July 27, 2006 12:49PM Report Comment

6. George Monsoon said...

The economy seems to act like a big seesaw. but the seesaw has become so wide that even a small change in interest rates could tip it.. now where is magnus pike when you need him..

Thursday, July 27, 2006 12:59PM Report Comment

7. Thesqueeze said...

uncle chris.... those are not 'core' inflationary items!!! don't you get it !!!! they are just temporary glitches.

which have been present all year...

Thursday, July 27, 2006 01:15PM Report Comment

8. bidin'matime said...

Blind is right though - we're gradually moving back to the position we were in back in 1992, when the government had to act on rates to prop up sterling. They never learn...

Thursday, July 27, 2006 01:20PM Report Comment

9. harold said...

It will be interesting to see the extent to which the money markets punish the if the MPC don't raise in August, particularly if the ECB does raise. It probably won't be a blood bath, but things could be shaky for a while. Clearly the markets are expecting a rise of at least .25 - I can see no other explanation for sterling's recent gravity-defying performance.

Thursday, July 27, 2006 01:54PM Report Comment

10. waitingfor hpc said...

had 2 commodity increase this week. 25% & 15%. Some materials i am paying 60% more than 12 months ago but average is about 35-40%.
Question is how long can the bank keep holding it's head in the sand?

Thursday, July 27, 2006 03:04PM Report Comment

11. waitingfor hpc said...

side of my reps has just got back from Cyprus. He was stranded out there as they were taking 50 people of every plane to the Uk to make room for Lebanese Refugee's to come here, and he says Turkey has been blocking the phone lines to disrupt the evacuation. This is the country about to join thew EU? Seems like we are going to house all the wrolds displaced people that should keep house demand up? More pressure on the tax payer.

Thursday, July 27, 2006 03:08PM Report Comment

12. Laksaboy said...

I can almost hear the gentle tap tap tap as George Soros dials his broker to check out what the futures prices are for shorting sterling.

Thursday, July 27, 2006 03:37PM Report Comment

13. autopilotengage said...

Well, if the currency markets do punish the in the short term, or worse still start to think the MPC doesn't take inflation seriously, the only way is down for the pound, and with our leverage on imports, especially as we are about to become a net energy importer, that's an inflationary cycle which could become difficult to bust. They'll be forced to act sooner or later.

Thursday, July 27, 2006 03:48PM Report Comment

14. Bhuvar said...

The thing with currencies is that they are all balanced against each other and have no intrinsic value apart from the trust of the government. If you take the Dollar for example with the US Billions of debt then balance against Sterling with our not so many Billions in debt and then the Euro with its excessive money count, all that the markets do is balance out which currency is the least favourable to hold, which at present is basically the Dollar, so in the short to medium term you get a stronger Euro and Sterling becasue they are not as bad as holding Dollars. But you will get a stonger Gold price because that is the only currency with value, what ever your price it against.

Thursday, July 27, 2006 04:09PM Report Comment

15. uncle tom said...

Although August has been looming up at us as a likely rate hike month for most of the year, my instincts are now saying that while the MPC should raise rates, this now looks much less certain.

Last month's meeting gave a unanimous vote, and very dovish, complacent minutes.

For next week's meeting they will have advance information on the inflation report. This may give worse news on the price of goods exported to the UK than they were expecting. They might be frightened into acting. But the other economic data does not signal the need for urgent action, and I don't think there is much expectation in the markets.

While I am in no doubt that they should raise the rate, my call this month (with more than a little trepidation) is:


Thursday, July 27, 2006 04:33PM Report Comment

16. Manjip said...

Uncle Tom is Mervyn King

Thursday, July 27, 2006 06:12PM Report Comment

17. paul said...

My prediction is 0.25% increase.

The MPC will pay dearly for the loss of creditibility and perceived lack of competence if they don't take a stand against inflation.

Friday, July 28, 2006 12:09AM Report Comment

18. sebastian said...

To be honest most of this goes over my head but I am thinking: No change!

Friday, July 28, 2006 01:03AM Report Comment

19. George Monsoon said...

My vote is "No Change", that is No change in the behaviour of an incompetent bunch of Winkers, who will see the banking in this Country (our only valuable asset left!) go down the plug hole!

Friday, July 28, 2006 11:13AM Report Comment

20. Indiablue19 said...

After what happened to Mr. Walton, and considering who replaced him, doesn't it seem like the deck is stacked and that no one is worried for "appearance"? With property "wealth" holding up the entire economy, Blair insisting on holding onto his chair, and Crash looking down the barrel of an election, wouldn't it seem that only some monumental crisis would change the inexorable direction of the MPC -- status quo?

Friday, July 28, 2006 11:18AM Report Comment

21. bidin'matime said...

I fear Tom may be right - but it will remove any remaining credibility that the MPC may have had and will only make it harder to get it right in the future. Maybe we should applaud this as the last thing we want is a 'soft landing' - let them push it right to the edge, then off.. Gruelling as it may be to see prices rise yet further in the meantime, the more ridiculous the situation gets, the more likely we are to see bearish headlines start to appear.

Friday, July 28, 2006 01:27PM Report Comment

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