Wednesday, October 18, 2006

November rate rise ‘certain’

November rate rise 'certain' as core prices soar

A SHARP rise in core prices and the worsening risk of inflationary wage deals in the new year are likely to force the Bank of England to raise rates next month, despite the sudden drop in the cost of oil.

Posted by sold 2 rent 1 @ 08:40 AM (1913 views)
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13 thoughts on “November rate rise ‘certain’

  • sold 2 rent 1 says:

    Correct me if I am wrong but the RPI hit 3.6% in September.
    Wasn’t the MPC upper limit 3.5% on this old measure?
    If we were still using this old RPI measure then Merv would have had to penned his letter to GB

    Bought my gold in Monday.
    Well actually I bought 2 unit trust gold mining funds inside an ISA wrapper to shield against any CGT

    The funds were:
    MERRILL LYNCH GOLD & GENERAL
    INVESTEC GLOBAL GOLD

    Gold mining shares offer a gearing of approximately 3:1 over gold price fluctuations
    It’s not an investment for the faint hearted but I have only invested 3% of my total assets

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  • anyone guess how high interest rates will go before inflation/rpi etc is curbed? My guess is 5.5%.

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  • tyrellcorporation says:

    As mentioned, they should have raised this month,, this will turn out to be another mistake as rises will have to be more severe in the future. I’m sticking by 5.25% by March 2007.

    There is an argument for a 0.5% hike in November to make people sit up and take notice. I think the 0.25% death-from-a-thousand-cuts approach has limited effect when the mood is so upbeat.

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  • yep tyrellcorp,

    a 0.5 hike would be a good thing to make people sit up and take notice (as well as good for my savings), but unfortunately I dont think it will happen though.

    BFS

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  • Looks like Merv will be having to write that letter soon.
    Tyrell, totally agree. 0.25% increases are just pointless, as the Fed found out.
    It baffles me why the bank take the wait and see, as they can always bring interest rates down again.

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  • I wish they would do something fast. We live in South Devon and are renting at the moment. We are competing with second homes and holiday lets and the rent here is astronomical compared to wages. The average rent is at least half of the average salary per month and then of course you have bills on top. However even to buy a decent place you are looking at between £800 – £900 per month mortgage as even grotty two bed terraces are going for nearly £200,000. We are running out of time in our current rental and to get something else we will have to pay at least £150 per month extra because prices have risen so much in the last two years.

    I also think that a 0.25% increase is a waste of time. It really upsets me to think that we might have to be forced into buying because like many others on this site I truly believe this can’t go on. Where’s all the money coming from? We certainly haven’t got it. Has anyone any ideas when things are likely to cool? There’s no sign of it as yet here in South Devon.

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  • sold 2 rent 1 says:

    mystie010,

    My point of view is that the market will keep going up at least until next summer.
    There is too much money sloshing around in London at the moment (which is presumably where many of the buyers in Devon are from)
    There will then be a stagnation period of another 6-12 months where prices don’t move much at all.

    Only when a recession hits, city bonuses dry up, inflation rises and interest rates hit 5.5 – 6.0% will the the crash start.

    There is too much recycling of money at the moment:
    Parents subsidising their children
    BTLers subsidising new purchases with MEWing on existing properties.

    The fallout will be severe but don’t exprect to buy until 2011. Keep saving.

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  • I still belive a 0.25% rise will upset the VI’s hugley although i’m sure they will pretend to shrug it off, I just hope the MPC don’t bottle it.

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  • I agree that the .25% rises might be too subtle – it’s the ‘boil a frog’ approach (drop frog in hot water, he jumps out, put him in cold water and heat it slowly and he doesn’t notice in time) – it would be better if rates rose swiftly, to bring people to their senses, otherwise they will simply keep paying the extra until they go bust.

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  • The .5 IR increase is an interesting idea. However, with a 7-2 split in favour of holding in October it’s unlikely that this would morph into a majority in favour of a .5 increase in November. Sure, a .25 rise in November does seem more likely than not – but it wouldn’t surprise me if the MPC just did nothing. My guess is that they’ll increase in November and then hold off until January before putting rates up to 5.25.

    Ah… the possibilities are endless.

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  • The possiblities are not endless. Either they will raise by .25% or do nothing. 2 possiblities. Or maybe just raise interest rates to 13% like in the 90s? I’m sure some people on here would cheer if that happened!!

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  • Yep!!

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  • couple core inflation with the growing inflationary pressures on pay settlements on the MPC will have to stop dithering and make a decision. Nov rate increase is as good as set in stone.

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