Interest rates could increase "with vigour"

drc

http://www.telegraph.co.uk/finance/economics/interestrates/5060492/Interest-rates-could-increase-with-vigour-warns-chief-economist.html

mewbie_2

He said: "The committee adjusted monetary policy boldly and decisively on the way down in order to meet the inflation target

What? They haven't met the target yet? It's still 3% or 50% ABOVE the target.

Graham_Devon

drc wrote: »

http://www.telegraph.co.uk/finance/economics/interestrates/5060492/Interest-rates-could-increase-with-vigour-warns-chief-economist.html

I been saying this for ages, I want royalties!

Graham_Devon

mewbie wrote: »

He said: "The committee adjusted monetary policy boldly and decisively on the way down in order to meet the inflation target

What? They haven't met the target yet? It's still 3% or 50% ABOVE the target.

Oh, purlease, do get with the times. They were chasing RPI all along, success I tells yer, success!

Dan:_4

Of course this will happen, the only question is when?

Dan:_4

mewbie wrote: »

He said: "The committee adjusted monetary policy boldly and decisively on the way down in order to meet the inflation target

What? They haven't met the target yet? It's still 3% or 50% ABOVE the target.

Your looking at this at a completely different angle.

chucky

Graham_Devon wrote: »

I been saying this for ages, I want royalties!

that's too easy a statement to make without providing a date or a time period so no royalties, sorry - "The Bank of England's chief economist has warned that policy-makers will hike interest rates back up with "vigour" when needed, to keep inflation in check. "

It's like saying that house prices will never go down or up - at some point they will.

I think rates will be going up after the next General Election - whoever wins

Johnny_Chaos

Those who take out a variable mortgage this year based on monthly affordability are going to be hammered!

Sure, interest rates will go up, but I don't think it will be until next year. Don't forget, during the 1930s depression, which many commentators are comparing the current crisis to, interest rates are almost zero for a decade. I don't think it will be that bad, but I cannot see them raising them for a good few months.

I worry about the Tories winning the next election. They'll have no qualms about raising rates - possibly to double figures like back in the Eighties. Great for savers - the kiss of death for borrowers.

baby_boomer

Why would the Tories wreck the economy and their reelection chances like that?

Any government raising rates rapidly would soon choke off a possible housing market recovery / stabilisation.

And just how much money is the government going to lose on its recent quantitative easing gilt purchases if interest rates start to soar :eek: ?

It will become clear that the nature of this crisis renders government - of either hue - fairly impotent, as Gordon is now discovering with the failed gilts auction.

JP45

baby_boomer wrote: »

Any government raising rates rapidly would soon choke off a possible housing market recovery / stabilisation.

Your comment reflects a concern I have, namely that the Bank may feel constrained in raising rates if the economy remains stagnant. In other words the risk of stagflation.

If a pick up inflation is accompanied by a rise in GDP then fine. But what if the housing market is still in the doldrums and consumer confidence remains subdued, yet inflation rises in line with a further fall in the pound or simply the delayed effects of the recent 25-30% fall?

Will the Bank really raise interest rates by the required amount to bring inflation back into line with the 2% CPI target? And what about those in government and possibly the Bank itself who might view a dose of inflation as a necesaary evil to reduce the value of the crippling debt burden?

epz_2

my thoughs would be that after we have it bottom and as we start to recover big debt laden economies like the UK will preset a poor risk reward ratio for 0.5% interest when your money could be growng in safer places.

This will force the boe to either raise rates to prop up the £ exchang rate or import the large % drops as inflation. As bad as it might seem hurt borrowers with big debts the alternative of raising prices for everyone buy 20-30% would damage the economy worse. Thats before the resulting wage inflation damages multintionals opinion of the uk and makes things worse.