Bank of England Rate Stays Same

Tassotti

Who said interest rates are rising?

manhattan

in november some people are reporting!

jamminjamaica

i have heard that they could rise .25% next week. i am currently arranging my mortgage for a 2nd time purchase and my morgage broker anticipates a quarter % rise very soon.

AndrewSmith

It is reported and suggested that a rise of 0.25% will occur in October or November.

This, along with last month's rise, has been predicted since the beginning of the year.

Not many people were expecting a September rise to be honest.

sanfrancisco

Tassotti wrote:

Who said interest rates are rising?

No one did. All Economists polled (49 I think) in the City this week ALL thought it would be a HOLD.

CB1979_2

sanfrancisco wrote:

No one did. All Economists polled (49 I think) in the City this week ALL thought it would be a HOLD.

not sure but Tassoti may have been talking about loads on here:

"house prices are falling"
"interest rates are rising"

you know who you are!! lol

manhattan

give it time,its only been a month since the last rise.

we dont want the housing market falling like a ton of bricks do we? lol

F_T_Buyer

AndrewSmith wrote:

It is reported and suggested that a rise of 0.25% will occur in October or November.

This, along with last month's rise, has been predicted since the beginning of the year.

Not many people were expecting a September rise to be honest.

I believe a rise will happen in November, as this is when the next inflation report is produced. By the BoE's model, it should show inflation above the 2% target 2 years out, and they will have to rise to save face.

It really does depend who you listen to about who predicted what. If you listen to the media, you would have thought rates would reduce at the beginning of the year, not rise. If you looked at the makeup of inflation, and what was driving it, you would have easily concluded rates were and still are too low.

The media may have been surprised, and there constant whining about the surprise rise makes it self fulfilling. Most independent economists (e.g. me) thought rates would rise, but was unsure about the timing. Look at how the BBC re-empts the rate the morning of the meeting, basically they haven't a clue, and they constantly quote economists who contradicts themselves often (yes, I’m referring to you Howard Archer).

Rates are still too low, and I expect inflation to continue to cause pain to those living on the edge.

Joe_Bloggs

@F_T_Buyer
You mentioned the phrase '2% target 2 years out'. Are you saying that the last interest rate change and the next one are going to have some effect in two years. It does seem like a very weak economic lever. Perhaps that's why the politicians used to jerk around with it excessively.
J_B.

F_T_Buyer

Joe_Bloggs wrote:

@F_T_Buyer
You mentioned the phrase '2% target 2 years out'. Are you saying that the last interest rate change and the next one are going to have some effect in two years. It does seem like a very weak economic lever. Perhaps that's why the politicians used to jerk around with it excessively.
J_B.

The BoE have to hit 2% CPI inflation in two years time. This is why lots of people are saying the BoE was totally wrong to reduce rates in Aug 05. The problem with this 'target' they can't be taken to account, as they will always forecast inflation to be 2% in two years (which is their target).

They also are given guildlines that CPI inflation should not fluctuate beyond 1% either side of 2%, so if CPI hits 0.9% or 3.1% Merv will have to write a letter to the Chancellor. Here's an example of that letter (click).

They also have a mandate of financial stability, but as they have ignored the rise in personal debt and increasing money supply, we can safely conclude they aint really bovvered about that.

Here's there forcast of the next two years:



Source: http://www.bankofengland.co.uk/publications/inflationreport/ir06aug.pdf

Bit wishy-washy isn't it.

Edit: It looks at CPI inflation in two years time, as this is how long it takes for interest changes to work through the economy. Remeber Consumer Prices is the last thing to rise in the inflation cycle (CPI) before it starts again with increasing wage demands.

meanmachine_2

jamminjamaica wrote:

i have heard that they could rise .25% next week. i am currently arranging my mortgage for a 2nd time purchase and my morgage broker anticipates a quarter % rise very soon.

Doom and gloom merchant.

Why would they rise "next week" when the MPC only sit once a month?

Anyway, I suspect, with a couple of rabid doves about to nest at the bank, we're unlikely to see any further rises this year.

Independent? My botty.