BoE MPC member says prices could drop to 2003 levels.

WTF?_2

adr0ck wrote: »

i think thats obvious

It's far from obvious.

The government appears to be gearing up to try to borrow its way out of trouble. That entails upward pressure on rates to attract buyers of sterling bonds.

Inflation is rocketing and shows every sign of keeping doing so for the immediate future. Whilst it's an issue, savers face seeing their savings shredded. Higher interest rates at least offer some protection to those who have saved and give people a real reason to put some cash in the bank (which hey, might even help the banks recapitalise).

Lower rates put downward pressure on the value of the currency. As long as the UK imports so much stuff, a weaker pound means yet more inflation for the public. With less exporters, there are less people to benefit from a weaker currency.


In short, the BoE kept rates too low for too long. Now they will have to be quite a bit higher than they should be at this stage of the cycle to try to stop inflationary meltdown and to allow the govt to borrow yet more money on the markets.

If only they had raised rates when the economy was steaming ahead and curbed inflation then (like House Price Inflation and the crazy lending boom). Around now they could be looking at cutting them from a subjectively 'high' level and giving the economy a real boost. As it is, rates are still relatively low but with little real-world effect and they can't afford to cut them any further.

dannyboycey

adr0ck wrote: »

i think thats obvious

Sadly, I fear many of the UK population share this view.

pickles110564

!!!!!!? wrote: »

As long as the UK imports so much stuff, a weaker pound means yet more inflation for the public. With less exporters, there are less people to benefit from a weaker currency.

All we have exported from this country for several years is fresh air in mty containers.
Apart from cut up metal heading out to China.
This country will suffer even more over the next 6 to 8 weeks when China shuts down.

ManAtHome

pickles110564 wrote: »

All we have exported from this country for several years is fresh air in mty containers.

Well, possibly a bit more, but not a lot more.

And still we get the persistent - "a weaker pound will help to re-balance the economy" - not sure if thet's due to mind-set stuck in the fifties, or IQ stuck in the fifties. Hasn't happened, and was never likely to - the few exporters we have left are being hit by input costs largely due to devaluation, and the twenty quid a month off mortgages has been soaked up by the extra 15-20% (devaluation) increases in food, power, and fuel.

But at least the buck is dropping faster than quid, so I suppose we can keep things tickerty-booing over until the rest of the world drops their "reserve" currency pegs.

adr0ck

beingjdc wrote: »

To reward people who won't control their spending, while letting inflation get out of control?

So splurgers' debts get smaller, while savers' nest eggs lose their value?

To bail out the buy-to-let 'investors' who can't meet the mortgage payments from the rent?

To stop people going on foreign holidays by making the pound collapse even further against the Euro?

To save the environment as foreigner stop wanting sterling, and the price of oil in the UK rises further so people can't drive so much?

Am I close?

because of the economy

though probably stick for the mo

down in 2009 (unless it gets realy bad)

brit1234

adr0ck wrote: »

because of the economy

though probably stick for the mo

down in 2009 (unless it gets realy bad)

We have seen in this country that cuts in interest rates had no effect. All the banks are short money and have kept rates higher to make up for it. Also LIBOR remains high. The US has cut interest rates down to nothing and still things are getting worse and in Japan when they did the same thing it took nearly 20 years to recover.

A cut in interest rates will do more harm than good. It will make imports more expensive so we will end up paying more for oil that intern put up all prices and lead to us all being out of pocket.

Then there are some of us who have been saving for years just to see the interest dwindle away. Why should those who have been responsible bail out those who have been stupid especially when it is likely to have no effect.

Remember it is the Bank of England's role to cut inflation which is going through the roof. If anything rates should go up.

adr0ck

brit1234 wrote: »

Then there are some of us who have been saving for years just to see the interest dwindle away. Why should those who have been responsible bail out those who have been stupid especially when it is likely to have no effect.

.

unfortunately i'm pretty sure the BOE and the Government are not worried about people who have loads of cash stashed away at the mo

i would hope that their more concerned with the 1000's of people losing their jobs at the mo

slipthru

adr0ck wrote: »

unfortunately i'm pretty sure the BOE and the Government are not worried about people who have loads of cash stashed away at the mo

i would hope that their more concerned with the 1000's of people losing their jobs at the mo

I fail to see how an interest rate cut will help people who have lost there jobs.

adr0ck

slipthru wrote: »

I fail to see how an interest rate cut will help people who have lost there jobs.

less people would lose their jobs

moanymoany

ManAtHome wrote: »

Well, possibly a bit more, but not a lot more.

And still we get the persistent - "a weaker pound will help to re-balance the economy" - not sure if thet's due to mind-set stuck in the fifties, or IQ stuck in the fifties. Hasn't happened, and was never likely to - the few exporters we have left are being hit by input costs largely due to devaluation, and the twenty quid a month off mortgages has been soaked up by the extra 15-20% (devaluation) increases in food, power, and fuel.

But at least the buck is dropping faster than quid, so I suppose we can keep things tickerty-booing over until the rest of the world drops their "reserve" currency pegs.

Now, what was it Harold Wilson said? Oh yes

It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued."
Prime Minister Harold Wilson