Sunday, March 30, 2008

The inflation target has become a joke

Pressure for rate cut as house prices fall

"The Bank voted against another rate cut this month on grounds that inflation was running well above the 2% target, driven by rising food and energy costs. But Fionnuala Earley, Nationwide's chief economist, said the Bank should act in April to ease lending conditions and breathe life into the housing market" after fudging real inflation data with the CPI, now the CPI too is running away, so what you need to do? cut? in the words of Diana C of Lombard Research, the biggest problem the BoE has is to cool this overheated economy. I hope Mervyn and co make the right choice next week. Look at the 59 comments to the article, all say the same. God Save The Pound!

Posted by confused76 @ 11:21 AM (1062 views)
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11 thoughts on “The inflation target has become a joke

  • “Fionnuala Earley, Nationwide’s chief economist, said the Bank should act in April to ease lending conditions and breathe life into the housing market.”

    Is Fionnuala implying that further cuts would be passed onto consumers this time as opposed to increasing bank profits? If not, then her plea for an interest rate cut is nothing more than asking for more money.

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  • There is no wya the banks are going to pass any rate cuts onto their borrowers, only onto their savers. Barclays have dropped their Esaver by over 100 basis points in the last three months even though the BoE has only dropped their base rate 50 basis points. Banks are hoarding cash, turning away borrowers, especially those needing huge LTV, so the BoE are doing one thing and one thing only, by dropping rates, devaluing the pound and increasing inflation, both of which help the government, by reducing the trade deficit in sterling, but will make saving a waste of time and increase the indebtidness of the general public, through inflation which, already well over 3% in real terms, will hit 5/maybe 6% CPI (which the government cannot hide) by the middle of the year. Then, if we have any economy left, the BoE will be forced to raise, raise, raise rates to combat first and secondary inflation, which they have created to bolster up an economy which has been artificially inflated by cheap credit, and the retailers have unrealistic economic forecasts based upon years of plenty. REALITY PLEASE AND GOD SAVE THE POUND.

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  • japanese uncle says:

    If house price drop automatically means cutting IR, then house price soaring should automatically mean IR increase.
    Stop this nonsence once and for all.

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  • Don’t forget, this is the Evening Standard’s writer writing for thisismoney.co.uk.

    I have never seen a bearish article on property in the Evening Standard. So them saying that defending the housing market from further falls is in the MPC’s remit is typical.

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  • …..another major reason for a forced rate cut, is that the Government is now the fifth biggest morgage lender in the UK. They will insist on the rate being lowered to record lows, just to avoid being the government responsible for collecting on a huge number of repossessions through default. As I said before it also helps the government as Gordy sold the country’s gold and bought Euros in 1999, so the devaluing of the pound will make Gordy look clever when he sells his euros, or forces the UK into Euroland, when parity is reached. Thus destroying the worth of every saver in sterling. I just wish there was something we could do to stop this VI rout of the British currency and the British public being sold down the Club Med river. A referendum will be called when parity and beyond is reached and the British people will then feel the real financial burden of the ‘No more Boom and Bust” years. I hope I am wrong, but I fear I am right. I would not trust anything this man or his predessesor have said or will say. Power corrupts, absolute power corrupts absolutely.

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  • it_is_going_with_a_bang says:

    Why should the bank breath life into the housing market?

    We are not seeing spectacular losses at the moment – infact the Nationwide and others have been quite upbeat about the property market.
    The bottom line is the housing market is unsustainable at its current level
    It is absolutely outrageous for people such as the Nationwide to demand lower rates.

    Prices in 10 year have gone up 300% and there is a 0.6% drop and they are demanding action???
    Unbelievable.
    Forget nasty recession – what about nasty lending practices? eh ?!

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  • hehehe, your all very very daft…… prices will not fall more than 10% at max, the governement intervention will prevail as i have always said.

    a levelling off over this year but a 8-12% rise next year when credit becomes more relaxed and rates are lowered.

    you keep on renting folks 🙂

    ching ching

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  • Greenenvy
    If prices fall 10%, your equity value falls by 50% because of your debt leverage
    Merry Christmas!

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  • Greenbay – when the pound has been devalued you may well need to holiday on the Bournemouth Costa rather than the Costa Brava….all thanks to you and your demanding the rate reductions to kick start the HPI, and by doing so destroying the worth of the pound in your pocket…ching, ching

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  • it_is_going_with_a_bang says:

    Not wanting to ruin Greenbays wealth dillusions, no government in History has ever been able to control or not allow something to happen of this scale.
    In part, that is why the problem which now exists is so huge.

    The only tools this government has to influence progress actually come back around later ( not so very long either ) and completely destroy the original objective.
    The only reason you post of here is because you know that to be true

    🙂

    It’s quite fun having you worry so much !

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  • Credit will only become more relaxed when the USA pulls out of recession and that is going to take a lot more than 12 months – 5 years would be more realistic.

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