Tuesday, Sep 19, 2006

Another interest rate hike then?

The Telegraph: House price inflation has taken us by surprise, says MPC member

House prices are rising faster than the Bank of England was expecting this year, according to Monetary Policy Committee member Kate Barker. Ms Barkers comments underline the fact that the recent jump in house price inflation could be short-lived, and may cause added concern about the fate of the property market. She also indicated that, with the economy growing strongly, the MPC was prepared to be more aggressive about raising rates to combat future inflation.

Posted by bufferbear @ 11:38 AM (497 views)
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7 Comments

1. Cstanhope707 said...

You know when Crash Gordon supposidly gave the Bank of England independance from setting Interest Rates it was a bit like those stupid outsourcing agreements in the early 90's where companies just changed the T shirts on their employees and suddenly they were working for someone else. I suspect the same crony mates of Crash Gordon have just been transfered to the Bank of England.

Unfortunately for him however they now have no choice and due to being so slack for so long they are now going to have to act quicker and more dramaitically.

Here is my prediction I say they will raise the IR to 5.25%..........

Tuesday, September 19, 2006 12:58PM Report Comment
 

2. P. Doff said...

--- 'on the other hand, house prices are rising faster than earnings, and I have to say that's a SUPRISE' --- And this is a statement from a member of the MPC - What planet do these people live on? We're all doomed!!!

---- ' It doesn't seem to me that this is unsustainable over the forecast horizon (of around two years)' ---- That's OK then. Just sit back and do nothing for the next two years while property prices continue to outstrip earnings. That way the homeowning population will still have access to MEW to keep pumping cash into the economy creating the illusion that the all is well in Gordon's boom-free miracle economy.

----- ' we have got the ability to bring inflation back more slowly if we want to' --- I now understand MPC policy of apparently doing next to nothing - apart from the odd ineffectual rate tweek (one in the wrong direction) It doesn't matter that inflation is above target levels, some MPC members hope that some 'self correction' will spontaneously occur over the next couple of years.

Tuesday, September 19, 2006 10:01PM Report Comment
 

3. tyrellcorporation said...

P. Doff, I agree.

It seems the underlying strategy of the MPC is to waffle a bit about how unsustainable things are as CPI and HPI are well above their respective targets and trends. They then sit on their hands while mumbling about future risks to the economy and that inflation 'may' start to fall later in the year.

The 1/4 point movements are (I feel) never really effective either as they are too small to really notice and won't make people sit up and modify their spending behaviour.

Unbelievably frustrating eh?!?

Wednesday, September 20, 2006 08:45AM Report Comment
 

4. George Monsoon said...

As much as I want the interest rates to spike and deliberately generate the desperately needed "POP" in this bubble, I think the BoE will be cautious, however I do think the base rate will be raised by a quarter percent in October and a further quarter percent in November.

--------------------------------------------------
I am not a market analyst, ex banker, accountant etc.. like so many of the educated people who visit this site.. but I do know that when the sky goes black, there is a high probablity of rain, and you should find shelter.

At the risk of having a Nostradamus take on this, I predict that this country is about to see the biggest recession we have ever whitnessed, with mass unemployment and a property market black hole. The result of a decade in which we have built up a mountain of dept with willing abandon and lived the high life while the developing world has snuck in the back door and stolen away our manufacturing industry. A decade that has imposed ever more crippling agricultural rules from Brussels that have all but ruined our farming industry.

What do we have left? Banking, thats about it, and when the bottom drops out of the pound we will be well and truly...$@~#ed


Wednesday, September 20, 2006 09:17AM Report Comment
 

5. autopilotengage said...

I suppose that the more media friendly members of the MPC, such as Kate Barker, who is probably the second most quoted member after Mervyn King, see their role as including giving the odd gloomy IR rise statement to the press in the hope of raising expectations of a rate rise, which will of course will contribute to doing their dirty work for them. I for one do actually think that the MPC will act when the data is put in front of them as their remit is clear. After all, the markets will be swift to punish the pound if the MPC fail to act on clear data. If inflation continues to stay above trend, and the MPC know that a quarter point hike is not going to trigger a recession, we're going to see some action.

Wednesday, September 20, 2006 10:14AM Report Comment
 

6. paul said...

The very fact that Merv is quoted as expecting to write the letter to Crash Gordon at some point in the near future means that at some point he's just going to let inflation run instead of tackling it with IR rises. Gordon will read the letter and bin it, agreeing that the spinning plates game with the housing market must continue at all costs, including the massive social costs of unaffordable housing.

Personally, I think that at the point when inflation goes over 3%, the MPC should resign, having failed their (really quite narrow and simple) remit.

Wednesday, September 20, 2006 12:56PM Report Comment
 

7. waitingfor hpc said...

and i agree with you all. The whole lot of them should be in court like the ENRON guys.. as failues and liars.

Wednesday, September 20, 2006 04:30PM Report Comment
 

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