Interest rates could increase "with vigour"

Cat695

Rates have to rise or the country will never pay off the Debt that CG gave us.

Anyone that thinks they shouldn't be raised, is asking for this burden to be past on for longer than it already will do.

Generali

Cat695 wrote: »

Rates have to rise or the country will never pay off the Debt that CG gave us.

Anyone that thinks they shouldn't be raised, is asking for this burden to be past on for longer than it already will do.

Who's CG please....?

ManAtHome

Crash ...ah ah.... Saviour of the Universe... (you'll have to imagine the Queen soundtrack, sorry).

Cat695

Generali wrote: »

Who's CG please....?

Crash Gordon....I thought that was his nickname now?

Radiantsoul

Cat695 wrote: »

Rates have to rise or the country will never pay off the Debt that CG gave us.

Anyone that thinks they shouldn't be raised, is asking for this burden to be past on for longer than it already will do.

I don't quite see how raising interest rates will allow debts to be paid off quicker. It might, but it seems likely that it will increase the proportion of income that needs to be devoted to servicing interest payments and so leave less for capital repayments.

Heyman_2

The BofE MPC is operating on a long-term view basis - they still see the overall trend of CPI as heading downwards despite the slight increase last month, and have acted accordingly.

Rates are basically at the lowest point they can be. Unless we see the CPI remain consistent or heading upwards in the next 6 months, I can't see that interest rates will begin to rise this year.

If the BofE starts to raise rates, even by 0.5% in one month, it will cause an immediate market reaction as everyone will assume that it is the beginning of the rises and if they are borrowers they will take steps to protect themselves.

The problem is - inflation won't be rising due to a high demand for luxury goods (i.e. Plasma TVs), it will be rising due to a short supply of necessity goods (i.e. food), and I wouldn't have thought interest rate rises would be a particularly effective instrument to temper price rises in this area.

I'm sure someone more economically qualified can correct me on this though?

bristol_pilot

Heyman wrote: »

The problem is - inflation won't be rising due to a high demand for luxury goods (i.e. Plasma TVs), it will be rising due to a short supply of necessity goods (i.e. food), and I wouldn't have thought interest rate rises would be a particularly effective instrument to temper price rises in this area.

I agree with this as far as it goes, but the real danger is that wage inflation will set in as necessity goods increase in price. Not much danger of that in the next few years with the current outlook for jobs, but when the recession eventually turns I can see large interest rate rises being needed to curb runaway inflation. 10% inflation and 15% interest rates in 2016 anyone?

whathavewedone

I am not more economically qualified than you but what you say does make sense.

I see rates going up when we start to come out of recession not while we are still in the depths of it.

mewbie_2

whathavewedone wrote: »

I see rates going up when we start to come out of recession not while we are still in the depths of it.

That's the ideal scenario. But it could be that rates have to increase while we are in the recession. Depends just how badly the economic crash and subsequent rescue job have been handled.

To put it very simply. If I emplyed a plumber who proceeded to flood my bathroom, would I employ the same plumber to fix it? No. Therefore having Brown doing the rescue job makes no sense at all to me, but far more importantly to the outside world, the people who consider whether to invest - take one long hard look - and decide to go elsewhere.

Tell us about the "pound in our pocket" Mr. Brown.

epz_2

Heyman wrote: »

The problem is - inflation won't be rising due to a high demand for luxury goods (i.e. Plasma TVs), it will be rising due to a short supply of necessity goods (i.e. food), and I wouldn't have thought interest rate rises would be a particularly effective instrument to temper price rises in this area.

if interest rtes go up our currency is more valuble and hence we can import goods and oil reativly cheaper than if the curency is at a lower rate. high interest rates would also make credit more expesive and reduce demand for plasmas etc.

in short higher interest raes would likely be benificial to the poorest as they never really got good rates anyway and pensioners while worst for the indebted middle classes.

polltically this may prove a problem for the tories