Why people want BoE rate to rise?

Really2

Cannon_Fodder wrote: »

So, is it magic fairy dust that they sprinkle on the factories, and hey presto there is "GROWTH" ?

For there to be growth, there has to be consumption/demand. It might feel like it sort of automatically happens, in a macroeconomic fashion, but at a nuts and bolts level, someone has to demand a product (when they didn't before) and pay for it.

I think you are forgetting what you wrote.

Cannon_Fodder wrote: »

Now, you talk of forecast inflation, exports, loans and you still haven't answered the question - focus now - "when the savings (encouraged to be spent by low IRS) are exhausted, what will stimulate consumption"...?

But when, whether in 2 years, or 10 years like Japan, we run out of savings, "WHAT WILL REPLACE SAVINGS TO PROVIDE A SOURCE OF CONSUMPTION"...?

So rates wont go back up until there is growth.
Savings are not being spent (unless you can prove they are but you have not yet)
It is disposable income that supports the economy not savings.

I think you have lost the plot on the thread, it is why people want rates to rise.

But you have gone way off topic with rants about pensioners and fairy dust.:rolleyes:

As usual i have given answers but you still fail to answer one question.:rolleyes:

Really2 wrote: »

What about the economy, jobs etc. do those people not count or should they all be sacreficed for [STRIKE]you[/STRIKE] pensioners?

I would check the BOE remit for base rate if I were you. Seems to be a response to inflation and the economy if you read it.
http://www.bankofengland.co.uk/monetarypolicy/framework.htm

The Bank’s monetary policy objective is to deliver price stability – low inflation – and, subject to that, to support the Government’s economic objectives including those for growth and employment. Price stability is defined by the Government’s inflation target of 2%. The remit recognises the role of price stability in achieving economic stability more generally, and in providing the right conditions for sustainable growth in output and employment. The Government's inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement.

Cannon_Fodder

Yes, disposable income is the normal consumption source, but in case it had escaped your attention, wage freezes, reduced hours and job losses are all denting UK spending power. 1 million extra unemployed, having lost their normal income, are going to pretty much offset the less than 2% growth in average earnings, so disposable income cannot support much, if any, growth.

I answered your question - "2% would be low enough to support businesses, imo, bank mortgage margins prove 0.5% is a false position" etc etc. That doesn't leave the economy or jobs at risk, IMO.

As you missed that, what else have you missed as I explain what I'm trying to get at...I'm not going to repeat the multitude of things you have ignored.

As for the BoE applying interest rates to control inflation, have you forgotten the 5% inflation in recent years? They are fallible, they have proven that.


To answer the OP, with another reason;

Robert Peston said ten months ago; "there is an absolute imperative for banks to reconstruct their balance sheets in a more sound and stable way, and that means funding more of their loans from our deposits and funding fewer on wholesale markets."

Increasing rates would encourage deposits, providing more funds which banks could lend out.

Really2

Cannon_Fodder wrote: »

Yes, disposable income is the normal consumption source, but in case it had escaped your attention, wage freezes, reduced hours and job losses are all denting UK spending power. 1 million extra unemployed, having lost their normal income, are going to pretty much offset the less than 2% growth in average earnings, so disposable income cannot support much, if any, growth.

Exactly, so that is why IR rates will not shoot up until growth can be supported without low IR's

All of the above is deflationary, so no I have not forgotten about 5% CPI but I have not forgotten about the above either.:)

Cannon_Fodder wrote: »

Increasing rates would encourage deposits, providing more funds which banks could lend out.

BOE base rate is nothing to do with high street deposit rates.
You can get 3.3% instant access accounts (55+ on fixed) now that's double inflation so a very good rate. .

So upping base does not mean deposit rates will increase.

We are at 3-6-3 banking.
3% on deposits
6% on loans
On the golf course by 3. (Thanks to some building society guy on radio 5:))

I think banks are making good margin at the moment and are getting debt paid back.
both are good for redressing their balance sheets
Would that happen on a higher IR now?

Cannon_Fodder

I took your advice and had a look at http://www.ageconcern.org.uk/

Strangely enough, I came across this from 31/3/09;
http://www.ageconcern.org.uk/AgeConcern/Documents/General_debate_on_the_economy_31_03_09_-_Age_Concern_and_Help_The_Aged_briefing.pdf

"...it is therefore essential that the forthcoming Budget includes further help targeted at the oldest and poorest pensioners. This should include:

-• A package of measures to help low income pensioners with modest savings"


Now why would they waste time and effort campaigning for a "non-issue"...?

Yes, its not the only issue, but if you want lots of things put right, why muddy the water with something so "unimportant"...

Really2

Cannon_Fodder wrote: »

I took your advice and had a look at http://www.ageconcern.org.uk/

Strangely enough, I came across this from 31/3/09;
http://www.ageconcern.org.uk/AgeConcern/Documents/General_debate_on_the_economy_31_03_09_-_Age_Concern_and_Help_The_Aged_briefing.pdf

"...it is therefore essential that the forthcoming Budget includes further help targeted at the oldest and poorest pensioners. This should include:

-• A package of measures to help low income pensioners with modest savings"


Now why would they waste time and effort campaigning for a "non-issue"...?

Yes, its not the only issue, but if you want lots of things put right, why muddy the water with something so "unimportant"...

Woooooo big fonts.


I agree give them extra support full pension the same as pensioners without savings perhaps.

You think the only solution is putting IR up but as stated that is bad for the economy.

No big font required

PS it was you who brought pensioners in to the mix not I

chucky

Cannon_Fodder wrote: »

I took your advice and had a look at http://www.ageconcern.org.uk/

Strangely enough, I came across this from 31/3/09;
http://www.ageconcern.org.uk/AgeConcern/Documents/General_debate_on_the_economy_31_03_09_-_Age_Concern_and_Help_The_Aged_briefing.pdf

"...it is therefore essential that the forthcoming Budget includes further help targeted at the oldest and poorest pensioners. This should include:

-• A package of measures to help low income pensioners with modest savings"


Now why would they waste time and effort campaigning for a "non-issue"...?

Yes, its not the only issue, but if you want lots of things put right, why muddy the water with something so "unimportant"...

it's a non-issue because pensioners had a choice to secure their retirement and chose the savings route where they expected interest rates to be much higher than they are now. unfortunately they are not and i have great sympathy for them.

just like house prices don't stay high neither do interest rates.

it's quite simple.

Cannon_Fodder

Really2 wrote: »

Woooooo big fonts.
PS it was you who brought pensioners in to the mix not I

The font came from pasting in the document text, jeez is nothing ever right for you...pick-pick-pick. "Calm down, dear."

I introduced pensioners, as we were asked for reasons why IRs might rise...its called taking part in the forum...

And it was you who introduced Age Concern as being the way to help pensioners, I was just taking your advice...for once you provide an evidence link and it backs up my point, great stuff!

Really2

It looks like the average pensioner is around £100 per year worse off it would be good for them to get a a hand out to recover that loss I think.

The median weekly savings income is £4 a week for a single pensioner

The average gross savings rate on an instant access account fell from 4
per cent to 1.6 per cent over the year

I make that the average pensioner has £5,200 in savings, Is that enough to effect their state pension?

I am not upset see the :)

So CF any other reasons now to increase base rate?