Friday, July 2, 2010

Bang on cue

Trio of BoE rate-setters dampen talk of interest rate hikes

Just last week they were talking of the need to raise rates soon. But lo! Next week is rate-setting week so now we see the torrent of news stories about the coming credit crunch and how mortgages might become harder to get and double dip recession and .... rates will have to stay at 0.5%.

Posted by paul @ 08:26 AM (1457 views)
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6 thoughts on “Bang on cue

  • Osborne will keep Darling’s mantra………. what ever it takes……… independant banking?……. dream on……

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  • Are you suprised paul.

    It is a central bank. All the real action now is with the Greenback. 🙂 SDR and all!

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  • Article parrots the old notion that: ‘a weak pound will improve British exports’

    Hmm, yes, a little; but how many British made exports sell in significantly greater volumes when the exchange rate is more favourable?

    Most of our exports are niche products that are not easily sourced elsewhere (else they would be..) – so increases in sales volume on the back of a favourable exchange rate are always going to be modest.

    On the other hand, a weak pound makes imports more expensive, fuelling inflation, and causing more harm to our balance of payments than is compensated by the small increase in exports.

    It is inevitable that the currencies of the developed world will devalue against those of the developing world, but within the developed world, Britain should strive to have a robust currency.

    It is time now for a modest increase in UK bank rate, although I doubt we will see one before August.

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  • UK had been a net importer for ages.

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  • I found this bit quite revealing:

    “Fellow policy maker Fisher said inflation can be largely attributed to a number of temporary factors such as sterling weakness, VAT increases and oil prices. He expects those factors to wear off and said the most likely outcome is that inflation falls back to below the 2% target over the next couple of years.”

    Talking about a timeframe of two years implies to me that the MPC are very relaxed about interest rates and won’t do anything in a hurry.

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