Thursday, Nov 09, 2006

no surprise: 5% base rate

BBC: UK interest rates increased to 5%

The Bank of England has increased UK interest rates to a five-year high of 5% because of inflation concerns.

Posted by millard @ 12:04 PM (394 views)
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18 Comments

1. paul said...

I like the following:

"The Bank has the difficult task of weighing up the effects of a possible slowdown in consumer spending caused by higher interest rates and people finding it harder to repay their debts, against its remit of reining in inflation."

It is preceisely because people have overstretched themselves that rates have gone up.

Duh.

Thursday, November 9, 2006 12:09PM Report Comment
 

2. harold said...

"Either way, with interest rates 50 basis points higher than six months ago, it could be a contributing factor to deterring people from entering the housing market over the next few months." Vicky Redwood, UK economist at Capital Economics

Err, yes Vicky, and people maybe also deterred due to the inflated bubble that is the UK property market.

Thursday, November 9, 2006 12:24PM Report Comment
 

3. sovietuk said...

higher higher :-)

Thursday, November 9, 2006 12:28PM Report Comment
 

4. Eddie_lomax said...

I don't expect people to stop trying to screw each other with ever greater house prices, but at least now there is some more pain for them.

Bring it on!

Thursday, November 9, 2006 12:35PM Report Comment
 

5. george monsoon said...

If they boil this frog any more, the bones will be all that is left...!!

Get the rate up 2% and be done with it, thats what I say...

Thursday, November 9, 2006 12:47PM Report Comment
 

6. sold 2 rent 1 said...

george,

Just found this article
THE LEGEND OF THE BOILING FROG IS JUST A LEGEND
http://www.uga.edu/srel/ecoview11-18-02.htm

The idea that you can induce a frog to remain in boiling water if you start it off in cold water is not true biologically.
The metaphor lies in the frog's ability to escape from the container: if there's no way out, then the frog's fate is a foregone conclusion.

Thursday, November 9, 2006 12:55PM Report Comment
 

7. denzil said...

Fantastic! That's an extra .25 on my cash isa.

Thursday, November 9, 2006 12:58PM Report Comment
 

8. David20040_0 said...

This will not make an ounce of difference to increases in house prices.

Thursday, November 9, 2006 12:58PM Report Comment
 

9. george monsoon said...

sold 2 rent 1 -
you mean this one?

"The legend is entirely incorrect! The `critical thermal maxima' of many species of frogs have been determined by several investigators. In this procedure, the water in which a frog is submerged is heated gradually at about 2 degrees Fahrenheit per minute. As the temperature of the water is gradually increased, the frog will eventually become more and more active in attempts to escape the heated water. If the container size and opening allow the frog to jump out, it will do so." Naturally, if the frog were not allowed to escape it would eventually begin to show signs of heat stress, muscular spasms, heat rigor, and death.

So where does that leave us with the metaphor for the human response to environmental degradation? Well the idea that you can induce a frog to remain in boiling water if you start it off in cold water is not true biologically. But that does not diminish the need to keep an eye out for the gradual relaxation of environmental laws and regulations. The metaphor lies in the frog's ability to escape from the container: if there's no way out, then the frog's fate is a foregone conclusion.

Thursday, November 9, 2006 01:14PM Report Comment
 

10. Bubbles. . . said...

Denzil same here!!! bring on more rises!!! Horray Today is a good day, and just the beginning of further rises...Not that I dont like EA's but hope it slows sales as they have been so smug,which I doubt though whats 20 quid on 100,000 oh oops if prices are above 200,000 (average) Thats 40 quid!! 40 a month times 12 an extra 480 a year to own a property in Band D to pay the Council tax that has risen to 1,300 a year plus if youve done the 95% mortgage
1,150 ish a month capital repayment before rise + heating costs which they say average 1,000 a year and rising! Oh who wants to pay that price for that house???? + extra 80 month to come with more rises I hope!!! 2-3 more 0.25%'s. OOps isnt it compounded intrest that works differently???? 0.25% on 0.25%....?? Please help with the math..

Thursday, November 9, 2006 01:22PM Report Comment
 

11. Bubbles. . . said...

Horray!!!!

Thursday, November 9, 2006 01:22PM Report Comment
 

12. Civic_illusion said...

Keep lifting it.. Higher & higher.. higherrrr

Thursday, November 9, 2006 01:36PM Report Comment
 

13. harold said...

sold 2 rent 1 and george monsoon

Err, sorry guys, you've lost me...

Thursday, November 9, 2006 02:01PM Report Comment
 

14. Ticktock said...

I'm certainly no expert, but arn't rising prices a concequence of inflation, rather than the cause of it? If the bank's remit is to prevent inflation, shouldn't they be reducing the volume of money that they are printing, rather than increasing it?
Fight inflation? What a laugh, the BOE is the cause of inflation, inflationary growth IS its policy.

Oh what a tangled web we weave....

Thursday, November 9, 2006 02:07PM Report Comment
 

15. C'mon Correction said...

Question is - Where next for interest rates? The money markets seem sure of another .25% hike in Feb '07. Beyond that CPI and RPI in the new year will count I reckon.

Interesting to see Sterling falling after the news - does this suggest money markets were maybe quite keen on a .5% hike in Nov?

Thursday, November 9, 2006 03:03PM Report Comment
 

16. george monsoon said...

Harold, the theory of "boil the frog" is that if you place a frog in a pan of cold water and heat it slowly, then it will stay there until it boils, but if you heat it quickly it will jump ship. The BoE use this method to raise or cut interest rates by .25% at a time instead of jumping by 1% or more, which would probably cause the market to collapse.

I cant think of a better analogy, try doing a google search on "boil the frog" wikipedia is pretty good for this

Thursday, November 9, 2006 03:06PM Report Comment
 

17. uncle chris said...

At least the frogs have an affordable place to live. By the way, I like the hints of "another IR rise in the new year" that have crept into the reporting. Is this 'spin' to soften the city and country up to gradual increases. I'm sorry, I'm with others here who suggest a big shock rise in IRs is the only thing that will knock sense into consumers, who have been living above their means for many years now.

Thursday, November 9, 2006 03:11PM Report Comment
 

18. bidin'matime said...

Nothing wrong with small rises - lots of small rises means lots of 'rate rise' headlines - people will start getting the message. In any case, we want inflation to keep edging up, so they are forced to raise rates even higher - if people stop spending now, they could be lowering them again next spring... So let's see those frogs well and truly boiled...

Thursday, November 9, 2006 05:10PM Report Comment
 

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