MSE News: Bank of England urged to raise interest rates

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"An economic report says the bank must increase borrowing costs sooner than planned to control inflation ..."

Read the full story:

Bank of England urged to raise interest rates

dunstonh

Are you going to post alternative articles that say that deflation is just as likely?

The problem with linking articles to speculation is that you are trying to predict the unpredictable. You won't get it right every time (probably not right most of the time) and will just come off looking silly when you get it wrong. For every economist or economic group that says one thing there are plenty of others saying something different.

Sceptic001

dunstonh wrote: »

Are you going to post alternative articles that say that deflation is just as likely?

I am not aware of any economist who is saying that prices are going to fall anytime soon. The Bank of England is hoping that inflation (as measured by CPI) will fall back next year from its current rate of 3.7% to its target of 2%. Other economists are far more pessimistic.

Of course stagflation (rising prices, stagnant economy) is a real possibility in current circumstances (falling pound, rising interest rates, rising taxes, high raw material costs etc.), but that is a whole different problem. The danger is that the government will see inflation as the easy way out of its debt problem, in which case savers are in for a bumpy ride.

mr_fishbulb

dunstonh wrote: »

The problem with linking articles to speculation is that you are trying to predict the unpredictable. You won't get it right every time (probably not right most of the time) and will just come off looking silly when you get it wrong. For every economist or economic group that says one thing there are plenty of others saying something different.

Now I know why I don't see you over on the house price board

CannyJock

I'm really not convinced by the argument that the base rate is effective in controlling inflation. The notion that it increases the cost of borrowing which leaves people less money to spend is flawed when liquidity from the banks has been strangled and the price of things that consumers buy is determined more by importation costs, oil prices, taxation, duty and currency variances.

I don't believe that increasing base rates will result in an effective downward pressure on prices to affect inflation. Reducing duty on imports and reducing duty on fuel will have a more direct effect on prices IMO.

Joe_Bloggs

@MSE Guy
Is there any chance of you linking to a specific reference to the report in the article so that others could read it ? I can understand it if the original article is not available for direct public consumption.
J_B.

StevieJ

Sceptic001 wrote: »

I am not aware of any economist who is saying that prices are going to fall anytime soon. The Bank of England is hoping that inflation (as measured by CPI) will fall back next year from its current rate of 3.7% to its target of 2%. Other economists are far more pessimistic.

MPC's Adam Posen warns Britain at risk of Japan-style deflation

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7760827/MPCs-Adam-Posen-warns-Britain-at-risk-of-Japan-style-deflation.html

dunstonh

StevieJ wrote: »

MPC's Adam Posen warns Britain at risk of Japan-style deflation

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7760827/MPCs-Adam-Posen-warns-Britain-at-risk-of-Japan-style-deflation.html

That is actually one I read at the weekend as well. There were a couple elsewhere over the last week too.

It highlights the two extremes that the media focuses on. In reality, 9 times out of ten (made up stat) it will be somewhere in between the extremes.

StevieJ

dunstonh wrote: »

That is actually one I read at the weekend as well. There were a couple elsewhere over the last week too.

It highlights the two extremes that the media focuses on. In reality, 9 times out of ten (made up stat) it will be somewhere in between the extremes.

And from Generali thread on the other board, M4 money signaling deflation.

https://forums.moneysavingexpert.com/discussion/2492463

dunstonh

StevieJ wrote: »

And from Generali thread on the other board, M4 money signaling deflation.

https://forums.moneysavingexpert.com/discussion/2492463

Oh no. don't send me in there.

BTW (thanks doesnt seem to be working for me today. I press it and the icon goes but the thanks doesnt appear)

neil324

Well with CPI @ 3.7% and Q1 2010 MOM inflation annualized about 6.5% :eek:

You can wheel out all the experts you like.

The only arguement for inflation to fall is another round of massive deleveraging, even then from a UK standpoint with where Sterling is and where it would likely go it would be muted.