Sunday Times - BOE to hike rates this year ??

inspector_monkfish

So it seems the MPC may start to push rates back up towards the norm — 5% is a reasonable estimate — faster than people think. The first rises could come this year but the continued weakness of bank lending argues against it and is the main barrier to recovery.


http://business.timesonline.co.uk/tol/business/columnists/article6543912.ece

Really2

inspector_monkfish wrote: »

So it seems the MPC may start to push rates back up towards the norm — 5% is a reasonable estimate — faster than people think. The first rises could come this year but the continued weakness of bank lending argues against it and is the main barrier to recovery.


http://business.timesonline.co.uk/tol/business/columnists/article6543912.ece

As he puts it: “There will be no Zimbabwe-style hyperinflation or 1930s Germany with wheelbarrow-loads of cash. There is probably not even going to be a significant sustained increase in core inflation from the trends preceding the current crisis — at least not unless the policymakers are extremely careless.”
He sees low inflation — 2% or less — for two years at least, as does the Bank. Will rates stay at 0.5% that long? The consensus among economists is that Bank rate will be at this level at the end of the year and only creep up to 1.5% during 2010. The era of ultra-low rates, it appears, is here to stay. Until January, remember, we had not seen Bank rate below 2% for three centuries.

I think that is saying we will still ony have a BOE base of 1.5% during 2010.

I don't think they are saying 5% will be here very soon.

Not may on here will be happy about the lack of hyper inflation

inspector_monkfish

Really2 wrote: »

As he puts it: “There will be no Zimbabwe-style hyperinflation or 1930s Germany with wheelbarrow-loads of cash. There is probably not even going to be a significant sustained increase in core inflation from the trends preceding the current crisis — at least not unless the policymakers are extremely careless.”
He sees low inflation — 2% or less — for two years at least, as does the Bank. Will rates stay at 0.5% that long? The consensus among economists is that Bank rate will be at this level at the end of the year and only creep up to 1.5% during 2010. The era of ultra-low rates, it appears, is here to stay. Until January, remember, we had not seen Bank rate below 2% for three centuries.

I think that is saying we will still ony have a BOE base of 1.5% during 2010.

I don't think they are saying 5% will be here very soon.

Not may on here will be happy about the lack of hyper inflation

precicesly.
my opinion is that rates will take alot longer to get from 0.5 to 5.0, (if they even get that high) than they did to get from 5.0 to 0.5 !!

Milarky

Since when has 2% been 'low inflation'? It's supposed to have been the 'target' for over five years now. In fact, 2% should properly be described as 'median inflation' - meaning that CPI spends as much time below as above '2%' and that the cumulative rise in the CPI index actually converges towards 2% [inflation per annum]

In reality, they have consistently missed their target by this measure - CPI is 'all over the place' and therefore divergent - not convergent to the official target. Now if you think I'm being unrealistic in claiming this for the 2% 'target' then they [the Treasury and MPC] should have redefined the meaning of that word at the start of the exercise [Jan 2004]

As it is, I think they have allowed their [in]actions over interest rates define expectations so that no one tries to hold them to (or question the logic of) having a target that is mostly missed - because they have chosen not to pursue properly.

Graham_Devon

A lot of this also depends on where oil is going, as that has the potential to hit inflation hard this summer again.

We know rates will go back up, they cannot stay this low too long.

When they do go back up, depending on how the rises are executed, we could see a lot of misery.

I think it's unwise to suggest rates "can't" go up quick. How many would have suggested they could drop to the level they have as quick as they did! 1.5% drop one month!

IveSeenTheLight

Graham_Devon wrote: »

A lot of this also depends on where oil is going, as that has the potential to hit inflation hard this summer again.

We know rates will go back up, they cannot stay this low too long. Why not?

When they do go back up, depending on how the rises are executed, we could see a lot of misery. So you have partly answered your first point as a reason why they would want to restrict interest rate rises. To restrict the misery it could cause.

I think it's unwise to suggest rates "can't" go up quick. How many would have suggested they could drop to the level they have as quick as they did! 1.5% drop one month! Of course they could go up as quickly as they dropped, nothing is for sure. The fact they dropped so quickly was a reaction to the economic climate we are in. It therefore seems reasonable to rasise rates slowly to assess if the economy can withstand each rise rather than plunge back into trouble again

Just a few queries to your post above

Graham_Devon

IveSeenTheLight wrote: »

Just a few queries to your post above

Queries?

Wheres the query?

I'm obviously not bothering with the "why not".

Really2

Graham_Devon wrote: »

A lot of this also depends on where oil is going, as that has the potential to hit inflation hard this summer again.

!

Hype. oil is no where near last years cost in £ terms (and won't be as high as summer last year)
It is only petrol that is high but still not as high as last year have a look a diesel, that as a bearing on COGS not petrol.

IveSeenTheLight

Graham_Devon wrote: »

Queries?

Wheres the query?

I'm obviously not bothering with the "why not".

i was querying your statements i.e. in red for clarity

they cannot stay this low too long. Why not?

depending on how the rises are executed, we could see a lot of misery. So you have partly answered your first point as a reason why they would want to restrict interest rate rises. To restrict the misery it could cause.

I saw the above as contradicting your first point

I think it's unwise to suggest rates "can't" go up quick. How many would have suggested they could drop to the level they have as quick as they did! 1.5% drop one month! Of course they could go up as quickly as they dropped, nothing is for sure. The fact they dropped so quickly was a reaction to the economic climate we are in. It therefore seems reasonable to rasise rates slowly to assess if the economy can withstand each rise rather than plunge back into trouble again

Again querying why you think they will go up as fast as they dropped. Again I think if it does rise as fast as it dropped there is a greater risk of seeing misery as you pointed out in point 2, hence why I think there will be a slow structured "return to normal"

Generali

Presumably as the effects of interest rate cuts fall out, RPI will tend towards CPI meaning it'll rise up to about 2.5% as things are at least.

My feeling is that interest rates will have to rise pretty soon as Governments across the world are competing to borrow limited amounts of funds. I also think that some nationalisation of pension funds is still likely to try to stave off the evil day where interest rates have to rise (probably by changing risk rules to compel pension schemes to buy Gilts).

Graham_Devon

IveSeenTheLight wrote: »

i was querying your statements i.e. in red for clarity





I saw the above as contradicting your first point


Again querying why you think they will go up as fast as they dropped. Again I think if it does rise as fast as it dropped there is a greater risk of seeing misery as you pointed out in point 2, hence why I think there will be a slow structured "return to normal"

You appear to be trying to hard to catch me out. I can see what you are doing, you don't really have an issue so are really going an*l on my post to try and find something.

Did I say "I think they will go up as fast"? No?

I simply said it would be unwise to suggest they cannot go up as fast, as someone else suggested. I didn't even make any predictions of any sort, neither was I arguing against any point you have made.