Thursday, May 8, 2008

BOE elects to hold UK interest rates

UK interest rates unchanged at 5%

UK interest rates have been held at 5% by the Bank of England's Monetary Policy Committee (MPC). The move was widely expected, although many analysts now predict that rates will be cut to 4.75% in June. The MPC's decision came despite a flurry of downbeat data this week which has added to worries about the state of the UK economy amid a global slowdown.

Posted by jack c @ 12:01 PM (1441 views)
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16 thoughts on “BOE elects to hold UK interest rates

  • need-a-crash says:

    As expected, after all the BBC said it would be a ‘hold’ and they of course along with the BoE and Govt are in this together.

    Realistically they should never go below 5% for the rest of the year but alas they’ll undoubtedly be cut next month.

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  • the haunted says:

    I can’t see any more drops if the MPC have any sense at least (a long shot I know). So, when is the rise going to start?

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  • Sense and the MPC?

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  • the haunted says:

    “Sense and the MPC?”

    I know, its a bit of an oximoron really…

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  • bidin'matime says:

    Did someone mention morons?

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  • Hahaha, so the BBC, the BoE and the Government in a filthy interest rate setting cabal? With Keith Moon on drums and Princess Diana on backing vocals perhaps?

    The magnitude of the financial storm that is breweing here is obviously as lost on you as on the MPC – and all their imaginary friends.

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  • crash bandicoot says:

    When the minutes come out there will be an 8-1 split, with the 1 voting for rates to be cut to 2% (and free ice-cream for American non-doms on government quango’s).

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  • I suspect we might see a 0.25% cut in June (unemployment lagging decline in house prices) thereafter a period of static rates before they begin to rise again – BOE has a difficult balancing act here.

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  • If they stick to their remit, there will be no cuts at all this year.

    – IF…

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  • UT if they had stuck to the remit rates would be increasing

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  • Would it be rude to point out their remit is not SOLELY to counter inflation?

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  • 11. James said…
    Would it be rude to point out their remit is not SOLELY to counter inflation?

    quite so james, quite so – perhap we should broaden our perspective on the boe – try this for a cucumber sandwhich

    designed to self-disintegrate

    In the meantime, the Bank of England found a suitable Governor possessing the
    ability to direct the forthcoming German bailout from London with American cash. A
    most strange, and intriguing character by the name of Montagu Norman was the chosen
    custodian: Norman would be Governor for the extraordinary duration of 24 years (1920-
    1944); a case unique in the entire history of the Bank. During the last stages of the
    German inflation, Norman initiated the process that would re-anchor Britain and most
    industrialized countries to the so-called gold-exchange standard. This operation –grossly
    misunderstood by contemporary scholarship—was by no means a sorry attempt bungled
    by a few nostalgic gentlemen of leisure to resuscitate the monetary system of yore (pre-WWI).
    Rather, it was the peculiar creation of the British Governor, whereby he
    enveloped, so to speak, for the length of six years (1925-1931) the banking networks of
    the West into a single, highly leveraged and palpably unstable web of payments, which
    was in fact designed to self-disintegrate. This too was a game, in which all participating
    central banks ‘chipped in’ a given quota in gold. To amass and protect the gold base of
    his Bank, Montagu Norman tested in 1920 two fundamental techniques, which he would
    employ a decade later to achieve the Empire’s objectives: 1) the pauperization of India by
    restricting her money supply (i.e., deliberate deflation) with a view to attracting Indian
    gold hoards to London, and 2) the encouragement of massive monetary expansion (i.e.,
    inflation) in America as a means to lure gold away from New York,

    http://druckversion.studien-von-zeitfragen.net/Conjuring%20Hitler%20Chapter%204.pdf

    and

    When German troops crashed into Czechoslovakia in September 1938 Germany claimed Czech assets. They applied through the Bank for International Settlements, of which Norman was a Director, for the release of Czech gold held in the Bank of England.

    The financial tomfoolery that followed would leave anyone confused, but the outcome was that £6,000,000 worth of Czech gold was transferred to Hitler’s Government, released by Norman.

    http://www.toolan.com/hitler/phoenix.html

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  • Jack,

    I agree, although we need to allow a little deflationary activity as restaurants (around 10% of CPI) start fighting for trade, as do retailers of discretionary goods.

    Both consequences of a drop in consumer confidence (and spending power)

    That said, the oil spike will gradually feed through, and by my rough calcs, that will add about 2% to inflation on its own.

    Sterling has been robust against the dollar in recent years, and steady against the euro, but we’re now sagging slightly against the dollar, and the euro is soaring.

    Add to that the dramatic rise in cost of manufacturing goods in China (around 30% when measured in sterling) and it’s clear that there’s an awful lot of inflationary pressure out there.

    There’s no mood for raising rates yet, but I suspect that before the year is out, the BOE and Govt. will need to decide whether to stick to the inflation target, or raise the target itself.

    The core issue will be the fact that raising rates – even by several percent – will have minimal impact on the current sources of inflation.

    I personally think it would be prudent to raise the target to 5% for a few years, but the media will probably be merciless if they do..

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  • malct,

    Montagu Norman was a remarkable individual, not only for the length of his tenure, but the immensely turbulent times that tenure encompassed.

    It should be remembered that the Bank of England was a private company at the time, and Norman was on the receiving end of some poisoned words when the post-war Attlee Govt sought excuses to nationalise it.

    I can’t pretend to have studied his career in intimate detail, but I have read up on the history of the BOE, leaving me with the impression that he was one of the ablest men to have ever presided over the Old Lady.

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  • uncle tom

    they create the debt but not the interest – that is why this is not an accident, this is a conspiracy!

    charts targets spikes mean bu%%er all

    good people knew this one hundred years ago

    a compliant media has most yuppies in a trance!

    ho ym dog, what have I got to say to annoy some people?

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  • 14. uncle tom said…
    malct,

    Montagu Norman was a remarkable individual, not only for the length of his tenure, but the immensely turbulent times that tenure encompassed.

    absolutely agree – more turbulent because of his inherited power

    shipbuilder – tyneside – great british industry – history – read without prejudice

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