Inflation may force Bank to raise rates

PasturesNew

Really2 wrote: »

Diesel and petrol have stated to come back down again also (diesel has come down 5p in the last week or so near me)

I bought a new car in April, I've had to go on many journeys that I'd have rather not done, but even so I've only filled up once since - typical, for me, it was at the peak price that I did it (filled up as I thought prices might be higher the next week).

It's because of the cost of fuel that I am not buying a house. I need to find a job first, then buy a house within commuting distance. Even today I've spotted a job to apply for that's a 50 mile round trip each day from the area I was skimming through RM for.... 50 miles/day is a gallon in anybody's car! That'd be a commuting cost, just for the fuel, of about £1500/year, or (for us lower rate payers) having to write off about £2k/year from a low salary. It's that cross-over point where if you walked to work you could claim WTC, but if you drive to work and pay £2k fuel and £2k keeping the car on the road to get to work you can't claim WTC but you're actually poorer than the person earning less and walking.

The ideal job is walking distance from home, or 3 miles maximum - and on a bus route, and preferably within a mile of a train station. In the coming 20 years, more people will be thinking like this.

PasturesNew

movilogo wrote: »

I don't want base rate to rise as I have a tracker mortgage!

I want rates to change because I expected to earn interest on my savings and that was my "safety net" in case nothing happened to bring money in .... nobody would have expected these low rates to have happened. Nobody. And to have them so low for so long ... hurts me

Generali

Thrugelmir wrote: »

That was yesterday. Today the new OBR has revised downwards the forecast of the amount of slack in the economy and also the rate of growth in the coming years.

These 2 things tug in opposite directions. Less slack in the economy is potentially inflationary (very Keynsian idea that) so implies higher interest rates. Lower growth is less inflationary so implies lower interest rates.

I agree with the idea that there is less slack in the economy than has been assumed as much investment was 'misdirected' during the boom into things like sub prime lending so wealth has effectively been destroyed.

Looking at the assumptions the OBR make about the drivers of growth:

- Consumption to rise below GDP growth as consumers retrench
- Government spending to grow this year and fall next
- Business investment to rise strongly
- Exports to grow strongly from 2011

This may well come to pass and certainly, IMO at least, the last 2 things are strongly intertwined. The key risks here are that the banking/financial system can't provide enough capital to business for investment to rise strongly and that exports don't take off as predicted which then leads to lower investment as you don't invest if you can't sell your existing product.

It is worth noting that pretty much all of Europe and the US is looking to export their way out of trouble. Who will the customers be if this is going to come to pass? The Chinese & Indian consumer seems an obvious candidate as incomes look to be rising strongly over there. Will it be enough? As ever, only time will tell......

carolt

chucky wrote: »

hi mr bravo,
could i invite you to a charity event that i'm organising.

it's a small contribution of your choice to a childrens charity if you are able to avoid reacting to the provocative nature of the previous posts that were directed at you. the time would 30 days.

Jesus fasted for 40 days and nights in the desert so there is no reason why we cannot abstain from these activities on MSE.
maybe there will be a miracle at the end of it all.

i am on day 6.

let me know what you think.
thanks,
C

Never thought of you as religious, chucky, but glad you've seen the light.

NB Not sure you'll get your miracle, chucky. I suspect that thanking other people's deliberately inflammatory posts may count you out of the 'truly good' category.

What miracle were you hoping for? Double digit house prices rises?

Think you will be needing a miracle to dig you out of your financial hole.

PS I'm not fasting.

carolt

PasturesNew wrote: »

I bought a new car in April, I've had to go on many journeys that I'd have rather not done, but even so I've only filled up once since - typical, for me, it was at the peak price that I did it (filled up as I thought prices might be higher the next week).

It's because of the cost of fuel that I am not buying a house. I need to find a job first, then buy a house within commuting distance. Even today I've spotted a job to apply for that's a 50 mile round trip each day from the area I was skimming through RM for.... 50 miles/day is a gallon in anybody's car! That'd be a commuting cost, just for the fuel, of about £1500/year, or (for us lower rate payers) having to write off about £2k/year from a low salary. It's that cross-over point where if you walked to work you could claim WTC, but if you drive to work and pay £2k fuel and £2k keeping the car on the road to get to work you can't claim WTC but you're actually poorer than the person earning less and walking.

The ideal job is walking distance from home, or 3 miles maximum - and on a bus route, and preferably within a mile of a train station. In the coming 20 years, more people will be thinking like this.

Will they? I suspect less as new technology means increasing numbers of people are able to work from home.

IveSeenTheLight

Generali wrote: »

I still don't think inflation is the big risk, although clearly it is a risk. Anyone expecting a rapid rise in real interest rates is deluded, misgiuded or wrong IMO.

Thought this was worth highlighting.

Generali

IveSeenTheLight wrote: »

Thought this was worth highlighting.

I love making myself a hostage to fortune!

IveSeenTheLight

Generali wrote: »

I love making myself a hostage to fortune!

Of course, in time it's likely to change.
We need to see a change in the current status before we'll see the rates rise back to the levels we saw in 2007.

Really2

One for LJ

Remember our debates on fuel and I was saying the fuel lows would be working their way out of the system around now.
http://www.cityam.com/news-and-analysis/uk-inflation-retreats-record-high

A further large downward contribution came from transport, where prices of fuels and lubricants rose by 0.3 per cent between April and May this year compared with a rise of 2.4 per cent a year ago.

Just thought I could be a smart @rse for a few mins.

lemonjelly

Really2 wrote: »

One for LJ

Remember our debates on fuel and I was saying the fuel lows would be working their way out of the system around now.
http://www.cityam.com/news-and-analysis/uk-inflation-retreats-record-high


Just thought I could be a smart @rse for a few mins.

You can't claim to be a smart @rse 2 months or more after the debate!:D

I'll maintain that at the time we debated prices were increasing.

I'll happily accept they've gone down since we debated this.

Oil went up by 2$ a barrel this week though, so I expect petrol prices will rise again soon;)