Monday, January 17, 2011

Expect tomorrows inflation figures to come in worse than forecast

Bank of England urged to resist pressure to raise rates

The Bank of England must ‘hold its nerve’ and resist pressure to raise interest rates until the strength of the economic recovery becomes clearer, influential forecasters have argued. The Ernst & Young ITEM Club has warned the Bank, which kept the base rate on hold at 0.5% last week, not to give way to ‘temporary pressures’ as headline inflation will return to target early next year.

Posted by jack c @ 08:28 PM (1856 views)
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9 thoughts on “Expect tomorrows inflation figures to come in worse than forecast

  • The Guardian published a story about IRs with a similar headline.
    Interest rate rise could wreck recovery, economists warn
    Unlike Citywire, the Guardian makes several references to the effect of raing IRs on the property market:

    “Analysts warn that an increase from 0.5% could spell a mortgage bill disaster if made too soon”

    “Higher interest rates could spell financial disaster for many of the estimated eight million households with tracker mortgages.”

    “Senior figures in the Tory-Lib Dem coalition are also concerned about the public’s reaction to rising mortgage costs if they coincide with a period of savage public sector cuts and job losses.”

    “A rise in interest rates could spell financial disaster for many of the estimated eight million households with tracker mortgages. Without low interest rates, mortgage bills could rise to crippling levels and lead to a rise in repossessions.”

    “However, other prominent figures in the coalition are taking the view that mortgage rate rises could turn middle England – which so far has been broadly supportive of the cuts agenda – against the government after a lengthy period in which it has benefited from low borrowing costs.”

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  • The saying, you cannot serve two masters, holds stronger than ever.

    So let it be the most important. The master of mass pain.

    Stock up what you can at todays prices guys, this is going to be drawn out.

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  • Hyperinflation. Hyperinflation. Hyperinflation.

    Well, someone had to say it.

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  • There will be a 0.25% increase but nothing more till september then another 0.25% until july 2012 even then its not a good idea give the austerity cuts and increase fuel prices both of which detrimentally effect economies 🙂

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  • sibley's b'stard child says:

    At what point does a series of temporary factors actually become a trend; is there an accepted cut-off point, I wonder?

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  • The Bank of England has missed its inflation target for more than 40 months in the last five years which makes the Item club suggestion that “headline inflation will return to target early next year” even more infuriating.

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  • This country is hooked on credit, these days its cheap credit. People want things and say “I’ll pay for it later”. Holidays, TVs, Houses. Sooner or later too much will be borrowed and everyone will get panicky about repayment of the principal.

    Have a look at the “temporary pressures’. Food prices, Metals, Oil – even the Network Rail stations are putting up parking fees! I ask you (and the ITEM club) are these prices ever going down, and next…are they continually going up?

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  • 8 million tracker mortgages? Is that the correct figure?
    I thought that there were only 20-30 million working people in the UK.

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  • 4. alan

    Deflation after total collapse. They will not have it any other way.

    Expect more street riots and a growing crime wave.

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