Rates to hit 2% next year.

Graham_Devon

So say the CBI...

The Bank of England will start to raise interest rates next spring and could take the cost of borrowing to 2 per cent by the end of next year, according to the latest CBI economic forecasts.


The Bank has held rates at a record low of 0.5 per cent to help businesses and consumers to contend with the recession, but the central bank will need room to act in the coming months if inflationary pressures become a worry, the employers’ organisation said. Ian McCafferty, the CBI’s chief economic adviser, said that he expected inflation to be volatile next year, renewing pressure on the Bank.


The CBI forecasts that the consumer prices index will rise by 2.4 per cent during the first quarter of next year. The Bank’s official target is to limit inflation to 2 per cent.

Bit different to what we have seen lately about rates being extremely low for "years to come".



The trouble with this fantastic recovery, or upward sprial as the BOE put it, is inflation.


http://business.timesonline.co.uk/tol/business/economics/article6845029.ece

purch

Unusual for the CBI to be 'bullish' about a recovery :rolleyes:

IveSeenTheLight

Graham_Devon wrote: »

So say the CBI...

Bit different to what we have seen lately about rates being extremely low for "years to come".

The trouble with this fantastic recovery, or upward sprial as the BOE put it, is inflation.

http://business.timesonline.co.uk/tol/business/economics/article6845029.ece

Interesting sections you didn't quote

However, Mr McCafferty said that the CBI would welcome interest rate rises next year as a sign that normality was beginning to return to the economic cycle

If it happens, do you agree that normality will have returned to the ecomonic cycle

His comments came as the CBI upgraded its forecasts for Britain’s economic prospects, predicting that Britain would emerge from recession by the end of this month

The CBI’s predictions of quarter-on-quarter growth in GDP of 0.3 per cent in the third quarter and 0.4 per cent in the fourth represent a sharp rise in confidence from the business group. At its previous economic forecast in June, it said that the economy would shrink by 0.1 per cent in the third quarter and stagnate with flat growth for the rest of the year

The CBI’s findings will come as a boost for Alistair Darling, who has argued since April that Britain would return to growth by the end of the year

purch

do you agree that normality will have returned to the ecomonic cycle

Don't confuse the poor lad.

He's still trying to come to terms with the fact he's a Bull now and not a Bear :eek:

inspector_monkfish

CBI?

Complete B*!!*cks Incorporated

mr_fishbulb

"[STRIKE]265[/STRIKE] 264 Chickens On Farm, Says CBI Fox"

thriftybabe

I don't know what to think about this. Every day there are conflicting stories in the news. One report will say we are out of recession another says we have a long way to go. I think you have to sift out what you ultimately think is right. I read the papers, come on to MSE and talk to business people and friends. I get a bit from everything and that usually helps me decided what stories are a lot of rubbish and what is not.

27col

They may say that we are coming out of recession, but the only way most people will agree is when the unemployment figures start to fall. It is probably good practise to ignore what newspapers say and also politicians. I tend only to believe specialist correspondents.Anyway, what you or I think about anything is irrelevant. What will happen will happen, regardless of what we think.

mr_fishbulb

thriftybabe wrote: »

I don't know what to think about this. Every day there are conflicting stories in the news.

That's because the majority of news report are just reading out press releases made by vested interest groups (CML, CBI, TUC, etc).

There is very little analysis in the news. Just headline writing.

You need to read articles written after proper investigation like those in the Economist. But they make too many peoples brain hurt.

Thrugelmir

CBI Press Release.

Richard Lambert, CBI Director-General, said:

"The outlook is improving as the UK draws strength from quantitative easing, a weak pound and a recovering global economy. Although growth this quarter should mark the end of the recession, conditions in the UK will remain tough for some time yet, and it is difficult to see where demand growth will come from.

"Firms that have run down their stocks will now be starting to raise output to meet demand, and consumers are likely to bring forward spending before VAT rises. But once these two boosts are out of the way there is no clear driver of robust economic growth into 2010.

"Growth next year will remain very weak, while job losses will continue and household consumption will stay tightly squeezed. The sharp fall in business investment this year is a real concern, as are the public finances, and both will affect UK economic prospects in the years to come."

After five consecutive quarters of contraction, UK GDP has fallen by a cumulative 5.5%, which is close in magnitude to the cumulative 5.9% seen in the early 1980s. The CBI forecasts that GDP will shrink by 4.3% in 2009 and grow by 0.9% in 2010.

Although inflation has been on a clear downward trend over the past year, it is likely to fluctuate over the course of the year ahead. CPI inflation is forecast to remain below the Bank of England's 2% target for the rest of 2009, but should then rise distinctly above target in early 2010 when VAT increases, before settling below target for the remainder of 2010. The UK Bank rate is still expected to start rising in spring 2010, reaching 2% by the end of the year.

Unemployment is expected to continue rising, but at a progressively slower pace. The CBI still sees unemployment peaking at around three million in 2010 Q2.

The CBI believes that household spending will stay under significant pressure as consumers remain worried about job losses, see weak wage growth, and opt to increase savings and cut debts. Household consumption is forecast to fall by 3.2% in 2009 and again by 0.2% in 2010, although on a quarterly basis it should grow slowly in the second half of that year.

Following its largest fall in over 40 years in Q2, business investment is expected to continue declining over the rest of 2009, shrinking by 17.7% in the whole year. It is forecast to stabilise early next year before starting to recover, but any rises in business investment will be heavily constrained by fears of excess capacity and concern about the strength of future demand. This means that the level of business investment in 2010 will still be down on this year, by 5.7%

As the global economy picks up and a relatively weak pound makes UK goods more attractive, UK exports should improve into next year to achieve growth of 1.7% in 2010.

The public finances remain in very poor health, and net borrowing in 2009/10 is expected to reach £176.2bn and £181.8bn in 2010/11, which would both represent 12.6% of GDP.
23 September, 2009

mewbie_2

Rates will probably not be lower than they are now.

How much higher? It depends on factors outside our control - a couple might be...

1. debt and financing it
2. commodity inflation as other countries recover leaving us behind

Fingers crossed it won't be an IMF moment, if can't sell our debt anymore.

Take out a big loan now? No thanks.