Monday, Sep 18, 2006

CBI worried about rising inflation

TimesOnline: CBI calls for rate rise in November

The CBI has called for the BoE to raise interest rates to control inflation which in their opinion is rising faster than expected.

Posted by denzil @ 12:08 PM (548 views)
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1. kpjcomp said...

It's going to rise even faster, when people run out of credit. People have not been pushing for wage increases etc, because they could borrow instead.

Also why November, the BOE knows it needs to raise, why wait?, they can always put rates back down again if they find inflation was'nt too bad. And the banks themselfts have more to worry about inflation then anybody, high inflation will wipe out the cost of borrowing, and this will hurt them real bad.

Monday, September 18, 2006 01:49PM Report Comment

2. inbreda said...

kpjcomp - That's a very good point re: wage demands. Very good.

The only problem this time is that people are so far in debt that if interest rates go up, they will be INSISTING on a wage rise. Economic thinking could be turned on its head if raising interest rates actually CAUSES wage inflation. Perhaps the only way out of this is to let inflation run riot and revalue the currency?

Also - I suspect that all of these announcements (First Gordon, then CBI) have been engineered behing the scenes to avoid the 'SHOCK RISE IN INTEREST RATES HURTS HOMEOWNERS' headlines that came about after the last rise.

At least it shows that they are planning to raise rates - I'd much prefer that to rampant inflation.

Monday, September 18, 2006 02:02PM Report Comment

3. sovietuk said...

They've no choice but to raise interest rates. Fortunately even Crash Gordon knows that there are things in the world such as other currencies and it would be difficullt to put a spin on a ten pound to the dollar exchange rate.

Monday, September 18, 2006 02:28PM Report Comment

4. denzil said...

re people pushing for higher pay due to running out of MEW etc.
I don't know about you but people being made redundant is starting to hit close to home, friends, family etc, so I'm not too sure how many will be pushing for high pay demands at present, even though I do agree with your point.

Monday, September 18, 2006 02:30PM Report Comment

5. harold said...

Interesting development. In addition, what these guys should also be asking for is that the real engine of inflation - money supply - by squeezed directly, not just indirectly via interest rates, which are a blunt monetary instrument. Still, it's a step in the right direction. Looks like at least one movement before Christmas for sure.

Monday, September 18, 2006 03:32PM Report Comment

6. Surfgatinho said...

The CBI asking for a raise in IRs - that really is serious! They're usually the cheif squealers around MPC meeting time.
Why bother waiting for November though?

Monday, September 18, 2006 05:52PM Report Comment

7. Nearly30 said...

A very interest thread - thanks everyone!!

kpjcomp's ideas on 'off-set wage increase through easy borrowing' rings true - with me at least - and might explain the rampant borrowing and re-mortgaging going on! A very interesting situation is brewing indeed.

Perhaps the 'put-it-on-the-slate-and-I-will-pay-later-when-I-can-afford-it' culture is begging to unravel - and fast!

Monday, September 18, 2006 08:08PM Report Comment

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