Sunday, Oct 22, 2006

Item Club Model Predicts Interests Rates Steady at 5% Due To Immigration

Item Club warns of 4bn black hole: The Groinean

Item Club uses the same economic model as the Treasury and predicts Interest Rates will not rise above 5%. Various reasons given but notably immigration will keep wage demands lower then otherwise.

Posted by talking rot @ 08:15 PM (553 views)
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13 Comments

1. Nohpc said...

Probably true but I think interest rates will go up to 5.25% and stay there for a while

Monday, October 23, 2006 01:20AM Report Comment
 

2. Bfskinner said...

not totally convinced by this. One of the biggest governement headaches every year is the NHS/Civil service inflationary up lift every year. With MEW drying up and inflation being higher than typically reported, there will still be alot of pressure to raise rates above 5% next year. Especially to try to knock inflatiojn down by MArch/April when the uplifts are due.

BFS

Monday, October 23, 2006 09:49AM Report Comment
 

3. little professor said...

The BBC sees it differently:

"The UK economy is expanding quicker than many of us anticipated - but it can go faster," said chief economic advisor to the Item Club, Peter Spencer. "However, interest rates need to be raised again in November to stop credit expansion and asset price inflation spilling over into excessive demand and inflation.

"If house prices continue to accelerate, interest rates will have to rise further in 2007."

http://news.bbc.co.uk/1/hi/business/6074724.stm

Monday, October 23, 2006 10:01AM Report Comment
 

4. geed said...

Just read the same BBC article

"asset price inflation spilling over into excessive demand and inflation." because it hasnt yet done that already!! I've also read that the current bout of month on month rises are seen as a recovery, a recovery from what? A recovery from sustainable growth to double digit silly inflation.

Sometimes i've just got to take a deep breath and reasure myself of all the reasons why i havent bought into this madness.

Monday, October 23, 2006 12:04PM Report Comment
 

5. sovietuk said...

I would like interest rates of at least 7% + so that people with massive mortgages get crucified.

Monday, October 23, 2006 12:16PM Report Comment
 

6. Steve1 said...

Interest rates at 7%. Surely not! Gordons got an Economic cycle and so have interest rates. The trend is your friend and they are going north.

Monday, October 23, 2006 01:38PM Report Comment
 

7. paul said...

I forsee 1970s style soaring inflation and strikes looming.

Gordon's public call for restraint in pay has been met by public sector strike threats.

Well you know how the old saying goes about trying to fool people.

Monday, October 23, 2006 01:45PM Report Comment
 

8. harold said...

If you take a look at the money-supply growth-rates around the world, its easy to see that monetary inflation is a global phenomenon. Guess who tops the league yes, that's right, the UK:

Britain + 13.7%
Australia + 10.4%
Canada + 6.5%
Denmark + 7.4%
US + 4.9%
Euro zone + 7.4%

Basically, despite the monetary tightening being advertised by the media and talked up by Merv, the supply of money has continued to grow rapidly. As a result 5% IR over the long-term in the UK is way off the mark. Sovietuks dream of 7% might well become reality before too long. Oh, and what's the consequence of the UK's money supply policy: bye-bye paper assets.

Monday, October 23, 2006 02:19PM Report Comment
 

9. kpjcomp said...

I've calulated that if interest rates for savings went to 6.8%, and using the savings from selling my house.
The interest after Tax, will pay for my Rent.. . Currently I'm renting at 575 and getting 400 interest.
So sovietuk, yeah 7% would be v.nice.. :), and about time Savers got rewarded.
Hopefully there's allready a Savings war going on, with banks like ICICI and IceSave, bring it on.....

Monday, October 23, 2006 04:00PM Report Comment
 

10. Ticktock said...

Paul is right. A return to 70's style inflation ( or more acurately 70's style stagflation) looks more likely by the day. The M3 figures that Harold points out suggest to me that inflation is already deeply inbedded within our 'miricle' economy, and is already starting to poke its head above even the cooked up inflation stats.

An influx of foreign labour will not make as bigger difference as is often suggested, and will only exasperate the growing political backlash against the continuation of this policy anyway. Britain is a relitively small island, and is already full to bursting point.

Anybody who believes that the economy will be saved by the British working class obediently sleeping 'head to toe' with Easten European Immigrants, does not know the British working Class very well at all

In fact, the current debt situation ( not to mention the Arab up-rising) probably makes the economic situation much worse than the 70's this time.

Monday, October 23, 2006 06:18PM Report Comment
 

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