Wednesday, March 9, 2011
An argument for a gently stagnating property market
Neptune Investment Management argue that we will not see any big interest rate rise in the forseeable future: "the Bank has little incentive to embark on a series of rate rises, as inflation is unlikely to be alleviated by lifting the interest rate from its current record low of 0.5%. Increasing global commodity prices, caused by the rapid expansion of emerging economies, is largely driving the current round of inflation, according to Dowey. Interest rate increases are only effective against broad-based inflation, which stems from rising wages, he explains." So although modest IR rises stressing indebted households seem plausible, the MPC may not 'get serious' about interest rates anytime soon.