Reinflating a burst bubble with air that has to be paid back.

Nylontokyo

How much longer can these low rates last?

Its like the government is trying to reinflate a burst bubble with borrowed air that has to paid back with interest from somewhere in the future.


How can anyone say this crisis is over, and things will be getting better from here.

Graham_Devon

Nylontokyo wrote: »

How much longer can these low rates last?

Its like the government is trying to reinflate a burst bubble with borrowed air that has to paid back with interest from somewhere in the future.


How can anyone say this crisis is over, and things will be getting better from here.

Psssst....

You are not supposed to actually ask people to back themselves up about talks of a full recovery....

purch

How much longer can these low rates last?

Until this crisis is over and things start getting better from here.

You can't have it both ways.

If things start getting better, then rates can rise.

If not they won't.

Jonbvn

Nylontokyo wrote: »

How much longer can these low rates last?

These low rates are not supposedly aimed at the housing market, although I have my doubts.

I can't see any increase before 2010.

ad9898_3

Nylontokyo wrote: »

How much longer can these low rates last?

Difficult one, and it's not necessarily in the hands of the government /BoE, the bond market is holding up just about at the moment, but it may not do so well when the BoE stops QE, that will be the test.

If the bond markets appetite for debt starts to shrink, the result will be rising IR's, whether the economy is out of recession or not. You also have the ratings agencies, if they downgraded us at some point, again rates would rise, regardless of the economy. Having to goto the IMF would be another reason.

I guess what I'm trying to say is it isn't just about what the government want to happen with IR's, there are lots of external factors that could have an effect.

Graham_Devon

purch wrote: »

Until this crisis is over and things start getting better from here.

You can't have it both ways.

If things start getting better, then rates can rise.

If not they won't.

What if the cost of fuel etc puts pressure on inflation and it starts going up again. Remember, CPI is still above their target, not by much, but it is, and it didnt fall very much at all last time.

Would they raise rates if inflation started rising again which I would think it will start doing soon thanks to outside costs.

angrypirate

purch wrote: »

Until this crisis is over and things start getting better from here.

You can't have it both ways.

If things start getting better, then rates can rise.

If not they won't.

By a combination of Government and BoE tinkering and a little luck with the price of oil, inflation has been artifically kept low.

Low interest rates = low mortgage rates has led to mortgage interest repayments reducing significantly
VAT cut
Oil Price peak and falll

These 3 things have led RPI looking very low. Once we are past the summer and the peak price of crude last year drops out of the figures, RPI will start increasing. Come november and the interest rate cuts are also out of the figures. By december i expect inflation to be rampant with interest rates increasing rapidly. We have a long way to go before a recovery, and rates will rise long before the recovery starts