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MSE News: Record inflation hike: could interest rates soon rise?
Comments
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Glad I put some money into index linked gilts.
I bet those who took out 5 year fixes on their savings won't be feeling too smug soon...
Well most of my fixed (4 years) cash ISA's were taken out at 6 to 6.5% so still a way to go
BTW I do have index linked NS&I as well. 'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
Sir_Humphrey wrote: »then interest rates may rise higher than they otherwise would have to have done.
Sooner not higher, (they have to go up in reality some time, no one is forecasting massive inflation triggering high IR's)
As I have said before the oil lows will have not even worked out of the system until July this year.0 -
But a rise in interest rates should reduce RPI, not quite sure what you mean.
Why would a rise for millions who are on trackers and SVR's reduce the RPI rate?
Their mortgage payments will increase so surely RPI should too? Why would it have the opposite effect? I don't know much about economics (clearly) but just cant see why inflation would reduce as real time costs increase
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Time for some index linked saving certificates methinks. BTW, RPI went from below -1% in Sept to above +2% in December. I.e. 3% in 3 months!!!
Doesn't bode well for my student loan interest!“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0 -
Have theyCome on Hamish, you know the score.
Linky, linky, linky;)
Surely got to be up at around 4% come this time next month when VAT is included in the calculations?
Assuming price changes are being driven by Sterling and oil prices, then RPI/CPI may well be extremely volatile for the next year or so.0 -
I am just bitter that I have a rate of 6% fixed for the next 2yrs, so any rise in interest rate is a bonus to me if it is going to effect the RPI figures.
Think longterm, high inflation will screw you after your 2 years. for most high inflation does not have to mean matching wage inflation.
It cost me £2.5K to dump my fix 15 months ago. It worked out, but I could have looked a plonker.
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Why would a rise for millions who are on trackers and SVR's reduce the RPI rate?
Their mortgage payments will increase so surely RPI should too? Why would it have the opposite effect? I don't know much about economics (clearly) but just cant see why inflation would reduce as real time costs increase
If the BoE increases interest rates then RPI (but not CPI or RPIX) should rise in the short run as mortgage payments increase (if other goods prices rise at the same rate as before) and then fall back as the price rises in other goods fall or even go into reverse.0 -
It looks like rebuilding inventories is going to be the driver for a bounce back in growth, a classic Keynesian way to leave a recession. According to a poster on fool.co.uk, London retail sales were up 12% YoY in December so restocking will be urgently required!!!
I have maintained for quite some time that moving from the current position (base rate = 0.5%, 'printing money', massive fiscal deficit) to a more normal position (base rate = RPI + 2%, not printing money, small fiscal deficit*) is going to be very interesting. We are entering uncharted waters and nobody, not even Golden Sacks' finest or even me(!), knows what is going to happen.
I agree the transition will be "interesting". QE (which has been done in a monetarist fashion) has not been tried before in the UK.
I would not try to read too much into London sales figures as most tourists to the UK stay in London (or Stratford upon Avon) so the weak pound will be boosting things there.
As an aside, my uncle works as a shopfitter and has been very busy for all of 2009. Last time I saw him over Christmas he said the recession had passed him by although when I asked, he mentioned that three jobs had been refitting ex-Woolworths stores. Although based in the East Midlands, his work can take him away from his local area.*Spending more than you tax has been the norm for UK Governments since the 1970s. Only the Tories under Thatcher (Lawson boom) and Labour under Blair (3G sale) have made any net repayment AFAIK.
Tax cuts (Tories) do not come for free whatever Art Laffer may have argued. Neither does public spending (Labour).
It is easy to forget that Brown paid off a significant chunk of national debt in the late 1990s. The downside of this was that then proved necessary to spend even more to improve public services afterwards as they had deteriorated more than they otherwise would have done. The flipside is that it may be easier to reduce Capital expenditure in areas which have received heavy investment (such as bricks and mortar) although push that too far and you are back to square one. Famine and feast has blighted infrastructure spending in the UK since WW2.
If there is a sudden spike in inflation, this will lead in the first instance to IR hikes, as these can be done straight away. Raising taxes is the next quickest way (at a budget), followed by cuts in govt spending.Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable. J. K. Galbraith0 -
Why would a rise for millions who are on trackers and SVR's reduce the RPI rate?
Their mortgage payments will increase so surely RPI should too? Why would it have the opposite effect? I don't know much about economics (clearly) but just cant see why inflation would reduce as real time costs increase
Because in theory Sterling would strengthen and reduce the cost of imports (this would
obviously be mitigated if other countries also increase rates).'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
Sooner not higher, (they have to go up in reality some time, no one is forecasting massive inflation triggering high IR's)
Not sooner, unless you were expecting IRs to be at 0.5% this time next year, which would only occur if deflation and recession were still with us then.
No, higher (i.e say 2% instead of 1% say.) I am still talking very low inflation and very low interest rates (as opposed to deflation and the lowest ever base rate as is the current case).
I find it disturbing how people are starting to treat 0.5% base rates as the new low and 5% as the new high.Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable. J. K. Galbraith0
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