BoE to hold rates steady forever despite lone rate rise call

inspector_monkfish

06:30 08Jul10 -BoE to hold rates steady forever despite lone rate rise call

* BoE to keep rates at 0.5 pct, maintain 200 bln stg of QE
* Sentance likely to be sole policymaker urging rate rise ever
* Tough budget, lower inflation weaken case for higher rates


LONDON, July 8 - The Bank of England is now certain to leave interest rates unchanged forever, as looming headwinds to growth and signs inflation has peaked mean last month's lone call for a rate rise is unlikely to find broader support.

The central bank announced its policy decision earlier today, and all 61 economists polled by Reuters last week now expect rates to stay unchanged at a record-low 0.5 percent forever.

Monetary Policy Committee member Andrew Sentance became the first policymaker to call for a rate rise in almost two years when he voted last month for a hike in rates to 0.75 percent. He has not been seen or heard from since......

He now won't be likely to be in a position to ever vote again for a rate rise, as he told Reuters that widely expected austerity measures in Britain's emergency budget the previous week did not remove the need for gradual monetary tightening. He is believed dead.

But the scale of budget cuts, which will require most government departments to cut spending by a quarter over the next five years, is likely to entrench other policymakers in their view that there is no need to raise interest rates ever again.

Job losses accompanying the cuts will limit wage growth and consumer spending for years to come.

And two of the main factors that have pushed up inflation over the past six months -- rising oil prices and weaker sterling -- went into reverse in recent weeks.

Consumer price inflation dropped more than expected to 3.4 percent in May from April's 17-month high of 3.7 percent, and in May the central bank forecast inflation would fall back to its 2 percent target by the turn of the year.

ILW

From what I can see, BoE rate seems to bear little relavence to rates being charged out there in the real world. Not sure who take any notice of it any more apart from those that still have tracker mortgages.

lemonjelly

inspector_monkfish wrote: »

06:30 08Jul10 -BoE to hold rates steady forever despite lone rate rise call

* BoE to keep rates at 0.5 pct, maintain 200 bln stg of QE
* Sentance likely to be sole policymaker urging rate rise ever
* Tough budget, lower inflation weaken case for higher rates


LONDON, July 8 - The Bank of England is now certain to leave interest rates unchanged forever, as looming headwinds to growth and signs inflation has peaked mean last month's lone call for a rate rise is unlikely to find broader support.

The central bank announced its policy decision earlier today, and all 61 economists polled by Reuters last week now expect rates to stay unchanged at a record-low 0.5 percent forever.

Monetary Policy Committee member Andrew Sentance became the first policymaker to call for a rate rise in almost two years when he voted last month for a hike in rates to 0.75 percent. He has not been seen or heard from since......

He now won't be likely to be in a position to ever vote again for a rate rise, as he told Reuters that widely expected austerity measures in Britain's emergency budget the previous week did not remove the need for gradual monetary tightening. He is believed dead.

But the scale of budget cuts, which will require most government departments to cut spending by a quarter over the next five years, is likely to entrench other policymakers in their view that there is no need to raise interest rates ever again.

Job losses accompanying the cuts will limit wage growth and consumer spending for years to come.

And two of the main factors that have pushed up inflation over the past six months -- rising oil prices and weaker sterling -- went into reverse in recent weeks.

Consumer price inflation dropped more than expected to 3.4 percent in May from April's 17-month high of 3.7 percent, and in May the central bank forecast inflation would fall back to its 2 percent target by the turn of the year.

You auditioning for a job with the mash?;)

I find this bit very interesting

Job losses accompanying the cuts will limit wage growth and consumer spending for years to come.

I keep asking people what is to become of our consumer led recovery. No-one answers this one. So what is going to cause the recovery? Seems to me we're all kinda just ambling along hoping it all goes away if we don't look directly at it...

I'll assume when VAT increases next january that'll be a blip too then...

Generali

inspector_monkfish wrote: »

Monetary Policy Committee member Andrew Sentance became the first policymaker to call for a rate rise in almost two years when he voted last month for a hike in rates to 0.75 percent. He has not been seen or heard from since......

Ha ha ha....!

princeofpounds

From what I can see, BoE rate seems to bear little relavence to rates being charged out there in the real world.

That's because the margins the banks charge are currently huge, compared to the very low levels before the crisis. They do this for two reasons - firstly they now think making loans is riskier, so need some profit to cover the risk of losses on some of the loans, and secondly because there is less competition between the banks to lend out money.

The cuts in the base rate of funding were largely offset, particularly just after the crisis, by the increase in bank margins. As the economy improved these eased off too and so we started to see low credit costs again.

chucky

lemonjelly wrote: »

I keep asking people what is to become of our consumer led recovery.

there doesn't have to be a recovery

lemonjelly

chucky wrote: »

there doesn't have to be a recovery

Of course there bloody does! Stagnation forever? No ta!

chucknorris

chucky wrote: »

there doesn't have to be a recovery

Seconded! you can keep the recovery if rates can stay at 0.5%. Of course we all know we will recover at some point.

IveSeenTheLight

ILW wrote: »

From what I can see, BoE rate seems to bear little relavence to rates being charged out there in the real world. Not sure who take any notice of it any more apart from those that still have tracker mortgages.

I guess your right.
Previously BoE rates fell and mortgage rates did not lower at the same pace.

Now we see BoE rates eing held and mortgage rates lowering

Really2

inspector_monkfish wrote: »

Monetary Policy Committee member Andrew Sentance became the first policymaker to call for a rate rise in almost two years when he voted last month for a hike in rates to 0.75 percent. He has not been seen or heard from since......

He now won't be likely to be in a position to ever vote again for a rate rise, as he told Reuters that widely expected austerity measures in Britain's emergency budget the previous week did not remove the need for gradual monetary tightening. He is believed dead.

Remember they used to celebrity stock exchange based on how often a name was mentioned on pages.

Do you think Sentance is running a similar thing with his own name.

chucky

it's all artificial, interest rates at 0.5% - you just wait until they go up and tens of millions will be unable to pay their mortgages.

ooooops wrong thread....