Sunday, September 19, 2010
The Case For Higher Rates
An interesting article and talks about capacity tighter than thought, inflation is not BoE sole consideration (as I have long suspected, BoE is pro growth more than pro stability) and the best bit: "The longer rates stay so low, the harder it is to shift them. If the Bank had made clear 0.5% was very temporary, everybody would have been prepared for the exit strategy. The risk is that the Bank leaves it too long, having given the impression ultra-low rates are permanent, any decision to hike could look like panic." And look at all these new mortgage borrowers who assume 2%ish rate is 'very affordable'.