Saturday, March 15, 2008

BoE need to ignore the bleating and keep down the heating

Inflation fears could keep interest rates on hold

The question I have is haw low will the pound be allowed to go.When I moved to France the exchange rate was about 1.5 Euros to the pound,now its about 1.25.Does anyone think it will be allowed to fall below the Euro.Also,interest rates in the UK are higher and the BOE havn't reduced them much so why is the pound falling? .......anyone with any realistic and backed-up predictions??????

Posted by bystander @ 07:56 PM (1024 views)
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7 thoughts on “BoE need to ignore the bleating and keep down the heating

  • the above is a comment/question posted uner the origimnal article

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  • It’s late: I meant under the original article

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  • japanese uncle says:

    As discussed in this forum time and again, reduction of the base rate by 1.0 point (as some commentators suggest), will precipitate GBP literally like a stone, as the currency is already in the route to the bottom. (Look GBP was 205 yen 24 hours ago, it is now worth just 200, unbelievable!)

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  • Here is a possibility – it seems plausible…

    I think there will be a continuing attempt to retain some link with the US dollar, as it drops, in order to preserve trade competitiveness for the UK.

    By dropping, and positioning the Pound to a Euro low, there is a competitive advantage for British goods – ie cheaper than the Euro area, and the UK could be placed to take advantage of that.

    As for inflation, we can’t avoid higher wheat prices (bread) and oil (fuel). I think Darling will just try to ignore it, and not appear on telly, unless he can manage the conversations.

    I think Trichet will be tempted to drop 0.25% next time round, for reasons I’ve already stated. Mervyn will do the same, following the Feds cut of 0.75% next week.

    The arabs (led by Dubai) will consider a separate currency and a decoupling of the dollar to a barrel of oil.

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  • But what currency will the Arabs couple oil to? Chavez had the foresight to demand payment for oil in Euros before the Euro started appreciating so much. If the Euro starts to fall back, would the Arabs want to trade oil for Euros, or would Roubles be a better long-term bet?

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  • stillthinking says:

    This is a fight against deflation. The US money supply has shrunk recently ( I was clicking through sites and found some graph, didn’t post here because I think originated here anyway). This recent spike in inflation is a spike. If people stop borrowing, if the credit expansion disappears, we are in for deflation. Why is Bernanke printing money? Because he is scared of deflation. Interest rates are moving down and credit money is disappearing. He has gone far enough to scare people.
    @JU ??. Who has supplied more cash than the Japanese.. Interest rates in Japan are at about zero and the yen -still- keeps going up. Do you mean GBP is falling because the real economy is about to shrink or because the pound is inflated? I think that the borrowers are gone in the UK, apart from one single irresponsible idiot borrower, aka the government. Are you abandoning your deflationary stance? How can the pound collapse if borrowing collapses?

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  • “Pressure on the MPC to deliver early rate cuts is likely to be increased by evidence that the credit squeeze is continuing to push up borrowing costs for homebuyers.”

    Yet AGAIN we see rather dim reporters stamping their feet and proclaiming that the Bank of England has to target asset (house) prices. That’s not in their remit, so I do wish they would stop pretending it is.

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