Wednesday, May 7, 2008

Bank of Brown: They shouldn’t cut…..but they probably will……

Data woes put Bank on course to cut rates

''...The Bank of 'Brown' is now on the verge of its first back-to-back interest rate cut in almost seven years, experts have claimed after a blizzard of miserable economic data....''

Posted by hpwatcher @ 06:03 AM (852 views)
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8 thoughts on “Bank of Brown: They shouldn’t cut…..but they probably will……

  • Every month just before the interest rate decision the media selectively trot out some data that ‘justifies’ a cut. It really is getting like Pravda…

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  • I’m not so sure about a cut.

    Mervyn king commented not long ago that once inflation is out of the bag, its very difficult to get back in. And every time they cut, it fuels inflation even more. The public sector is already threatening to renegotiate if RPI moves even a jot above 3.0%.

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  • ”I’m not so sure about a cut. ”

    I agree….but I’m thinking about the ”Brown” factor.

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  • ….but Paul RPI currently stands at 3.8%, it is the highly reliable and not at all manipulated figure of CPI that currently sits “below” 3%

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  • stillthinking says:

    “includes everything from finance to hairdressers “. I think this should read “finance -and- hairdressers” ‘cos talking about our beloved economy.

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  • shipbuilder says:

    They will cut and the excuse will be that the slowdown will dampen inflation and that fuel/food inflation is a temporary speculative spike.

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  • “According to property derivatives, traders currently think it would take a decade for property values to climb back up to the highs of 2007”

    That equates to a fall of over 30% if wage inflation keeps on track for the next ten years.

    As wage inflation will probably stall as we move into recession, and house prices will still be above their sustainable level after a fall of 30%, it implies that either the traders are being much too rosy in their outlook, or that they think inflation is going to take off. However, the yields on ten year bonds are still quite low, so for those who play the derivatives market, it should be possible to take a very good position.

    ~~~

    As for the BOE, it’s a hard call – with a unique three way split last month, and Danny boy speaking out of turn since, it could be a very frosty meeting..

    The oil price rise of the last 12 months, when it feeds through, will be enough to add about 2% to inflation on it’s own. With food prices and both eurozone and Chinese made products costing a lot more, there’s an awful lot of inflation pressure out there.

    Cutting a quarter point will soften sterling but do little else – no change looks prudent.

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  • Oil to $200…

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