Wednesday, November 14, 2007

A bit more detail on that amazing MPC announcement.

Bank of England Signals Need for Rate Cut in 2008

``The report gives a clear signal that a series of interest rate cuts lies ahead,'' said Vicky Redwood, an economist at Capital Economics Ltd. ``The MPC will wait until early next year to cut.''

Posted by tyrellcorporation @ 11:12 AM (1919 views)
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19 thoughts on “A bit more detail on that amazing MPC announcement.

  • tyrellcorporation says:

    Is this a classic case of commentators with Vested Interests trying to shape the markets expectations so that the MPC will be guided by those expectations as they don’t want to ‘shock’ the markets?

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  • “don’t get a mortgage now… wait till next year for interest rates to come down”?

    simplistic view I admit, but it’s how I look at it!

    Gonna be a cold few months for the EAs

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  • tyrellcorporation says:

    Also, won’t this comment de-value Sterling and in doing so increase inflation via more expensive imports. It seems a bit bizarre to announce this unless they think that Sterling is getting too strong.

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  • As I mentioned in another post, I can’t see any downside for the government with this tactic – if they can keep headline inflation figures down by managing the metrics, why not? Am I wrong?

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  • house prices will still fall……japan interest rates are 0.5%..and houseprices have been falling for 17 years!

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  • taffee you cant compare UK house prices with Japan. You can say that per Keynes you cant always cut interest rates to stimulate demand (after a certain point [in time not of the level of rates] you are “pushing on a string”). Japans house prices were a true Bubble – generation mortgages, and the estimated cost of the imperial palace worth more than the whole of california at the time. We could see some IR falls which could stave off the end of the “mini-bubble” here [although i do agree that we have had the highs and are downward bound from here]. I just really dont think you can (in the way you are) compare the UK with Japan.

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  • sorry Taffee i should of said I dont think you can – not you can’t!!

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  • the MCP report pre-date Monday’s poor factory gate inflation numbers and Tuesday’s poorish CPI data.

    Looking at the new data today’s Telegraph reckons the scope for cuts in rate is severely limited.

    http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/14/ccom114.xml

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  • george monsoon says:

    never mind house prices, I’m more worried about how I will feed my family, when the great depression of the 21st century hits. We don’t produce anything anymore, so we can’t even rely on our own industry to keep us in bread and butter

    Think Im a fool? then lets see what happens…

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  • George – you’ve got it worse than I had it the other day!
    You don’t need to worry, though, Gordon Brown has a ‘vision’ he will share with us. It will all be OK.

    I thought you had given up on this site and were going away?

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  • planning4acrash says:

    Thanks S2R. Question is, why on earth haven’t the Tories got hold of this debt issue? They could easily suggest that they didn’t invest so much in public services because they were being prudent and keeping debt under control. How could Labour get away with exponential debt growth almost from the second they got into power?!

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  • P4C,

    This is primarily a household debt problem. Public debt is a much smaller amount.

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  • tyrellcorporation says:

    Cornishman. ‘I thought you had given up on this site and were going away?’

    In the words of Tubbs (LoG), ‘you’ll never leave here!’

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  • “This is primarily a household debt problem. Public debt is a much smaller amount.”

    Don’t be so sure.

    Private Debt is at 100% of GDP
    Public Debt is supposed to be at 40% – Unless you count PFI deals and Network Rail. 80% of GDP at a conservative estimate, probably 100%+

    Lots of the PFI deals are linked to RPI. If I were a sneaky government I’d reduce my debt via inflation and massage the RPI figure down.
    Not being a goldbug myself, I’d hedge the inflation by owning some (International) commodity and supermarket shares.

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  • little professor says:

    s2r – I thought japan was a nation of savers? Surprising to see it has higher household debt than the uk and us…

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  • s2r1, Japan is not as debt ridden as the UK.

    The personal savings in the Japan Post Office recently made it the largest financial institution in the world by assets.

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  • You can’t compare house prices with Japan. However, deflation is the same concept everywhere. Who votes that the BoE are shaping up for an early attempt at fighting deflation? Given that the bank rates have already separated because of “liquidity” problems, and that you can’t borrow directly from the BoE at a super cheap rate (unless you are a useless bank). Japanese people save and their government borrows. They have their own separate, yet fascinating problems. The Japanese people would find it much easier to walk away from the yen and towards an alternative currency, because their government owes the money. Difficult to send the bailiffs to the government.
    “They” as in, I flooded the engine Brown, I poured all my fertiliser on at once, -do- want to devalue Sterling, like Sarkozy wants to devalue the Euro and Bush wants the dollar to go down, they are all scared of deflation. The money that is vanishing is enormous. You could average the amount disappearing everyday at trillions. What about the US denizens of Ohio who have cunningly decided that they won’t pay back any of the money and more bl**dy fool you. Nobody wants to end up with the high currency. The shocks are coming in the wrong and unpredictable order.
    The interest rate change is TOO impossible (not too late), the government should have stimulated with tax cuts and borrowing, but tax is maxed out and so is gov. borrowing. So Mervyn is in charge now, or would be apart from the pesky banks lifting the rate anyway.
    Maybe some people really would like to see Britain prosperous, but there are many more who just want the cash, and who can blame them.
    As usual, I don’t really know, but I don’t believe we will be getting really high inflation, because the poor sad moron from the UK wouldn’t be able to pay…

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  • Japanese people save like their lives depend on it, and their lives do depend on it.

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