Tuesday, April 26, 2011

Tomorrow’s GDP Figures Crucial Factor

UK interest rates: When will they rise?

Interest rates in the UK have been at a record low of 0.5% since March 2009, and the arguments for raising rates are gathering momentum. With inflation at double the Bank of England's target, and likely to stay there for some time, many think the Bank should increase rates sooner rather than later in order to combat rising prices, which are eroding consumers' spending power.

Posted by rantnrave @ 04:03 PM (2438 views)
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6 thoughts on “Tomorrow’s GDP Figures Crucial Factor

  • The Bank of England is unlikely to raise the country’s base interest rate until August, Merrill Lynch’s Bill O’Neill claims.

    O’Neill, the chief investment officer for Europe, the Middle East and Africa at Merrill Lynch Wealth Management, agrees with the consensus view that the Monetary Policy Committee (MPC) will delay any rate rise until it is clearer why inflation recently fell from 4.4% to 4%.

    “The MPC still feel it is too early to be sure that the slowdown in growth towards the end of 2010, especially in consumption growth, was temporary and appear to want concrete evidence showing otherwise,” he comments.

    O’Neill adds that the British GDP figures for the first quarter of 2011, due to be published by the Office for National Statistics tomorrow, are unlikely to offer this evidence, which reduces the chance of May base rate increase.

    In addition, he claims the sterling’s continued advance against the weak dollar and signs that it is strengthening against the euro show the market expects the MPC to wait until the latter half of the year to move the base rate from its historic low of 0.5%.

    SOURCE http://www.fundweb.co.uk/bank-to-wait-for-rate-rise-claims-merrill-lynch’s-oneill/1030106.article

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  • The Bank of England is unlikely to raise rates for years to come. Only they can’t say that, can they?

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  • markj69 str05 says:

    IR needs to increase to control inflation (Or show that BOE are serious about inflation) – But that will impact on the HPC(And we can’t have that, can we?).
    Salaries need to increase to re-balance the reduced standards of living – But that will cause an inflation spiral.
    People need to spend more to help economic recovery – But they don’t have the money, and can’t afford to.
    People need to save more for their future years – Contradicting the one above, and with the same response – Non-affordable.
    Banks and investment Co.s bring the country to its knees – But they are heralded as the only people able to save us (And command huge bonus’s whilst most suffer a loss of income and standard of living)

    The whole economic system in this country seems to be at odds with itself – the Paradox era!

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  • stillthinking says:

    The UK money supply is only just about holding steady. The only reason why there is inflation is because none of the money that got wasted has been written off, nobody has taken a loss yet. Everything single thing is still on the books including absurdly enough the Iceland money.
    The money supply expanded hugely, but the economy shrank. All of this make believe cash is rushing into the painfully small rump of the UK economy and overseas.
    We are still in the same boat as before, either the losses get monetized which will be worse inflation, or the banks take the losses which will be deflation (with the bonus of starting off again), or we drag out the write-downs over a lost decade. What is worse is that the China masking effect looks pretty much over, so prices will go up even as our money supply goes down.
    Share prices have been pushed up so the price/earnings are too low, soon enough people are going to rush back to cash unless Mervyn credibly convinces people that ten percent and rising inflation is OK while he busily prints cash. I don’t think this will happen because he does not have the leeway, then people will sell out at the top, and then they will sell out in a panic. At the moment money is close to free, but what cannot go on for ever eventually stops.

    The UK is a poor indebted country temporarily benefiting from rushed reorganisation at a loss by our trading creditors. King either gives the banks printed money, or forces loss acceptance i.e. the banks are bust without printed money. This is the same as before.

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  • If inflation is expected to come down by 2012 why raise them.

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  • My sister was saying yesterday that she pays less on her tracker mortgage for her gorgeous detached house than she does on dog insurance, ie about 60 pounds per month, so she wasn’t worried about finding another job when her contract runs out. This is the government’s gift to home debtors, you can save enough money on your living costs that you don’t even worry about unemployment.
    My sister hangs out with a whole lot of other nonworking wives on the estate who drive around in flashy cars and spend up big. They all think I’m crazy renting for £875 per month instead of buying and being too busy working to come for coffee with them during the week.
    Yes, I know, risk of capital losses and all that, but not obviously happening in this area yet.

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