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Interest rates will go up quicker than anyone expects, ex-BoE officials warn
Comments
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Graham_Devon wrote: »Are you STILL pedalling this?
If I actually made this point you pedal into a new topic to discuss it, would you stick around? Or would you just leave to pedal the same line in another thread? As per usual.
If you're confused about the effects of interest rates on debt Graham I'm sure someone will explain it all to you.0 -
Blacklight wrote: »If you're confused about the effects of interest rates on debt Graham I'm sure someone will explain it all to you.
Ahh I'm confused.
I guess translated that means "no, I do not wish to take part in discussing my theory, I only want to keep saying it".
Thought as much.0 -
do you think they may just ignore inflation for now?
if they do raise rates the Govt will be paying more on the debt that they're paying interest on.
what's the greater pain - inflation or paying higher interest on Govt debt?
People seem to think there is a mythical 'they' who raise interest rates. There isn't.
Interest rates are set by the market. The BGofE might change base rates, but unless there is a corresponding linkage to what is happening out there in the real world, it's a waste of energy.
The last year or so has seen the widest gap between official rates and real rates in history, suggesting that irrespective of what the BofE says, rates will go where they want to go. And that is where the markets - supply and demand for money - tells them to go.
The government doesn't pay interest based on its on base rates. It pays interest based on whatever it borrowed that money at - rates set by debtor nations, by the World Bank, by the yields set at the time of gilt auctions etc.0 -
Providing recent improvements in the USD/GBP rate stay for a few months, its affect on imported fuel will quash 10 times over the inflation timebomb that is 5p on a loaf of bread.0
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Providing recent improvements in the USD/GBP rate stay for a few months, its affect on imported fuel will quash 10 times over the inflation timebomb that is 5p on a loaf of bread.
Still 14p of duty rises to hit vehicle fuel over the next 4 and half tax years.
As duty is Vatable that's another 2.8p of VAT on top is VAT stays at 20%.
We may hit a price of £1.50 per litre for unleaded fuel in the next 5 years.
T0 -
People seem to think there is a mythical 'they' who raise interest rates. There isn't.
Interest rates are set by the market. The BGofE might change base rates, but unless there is a corresponding linkage to what is happening out there in the real world, it's a waste of energy.
The last year or so has seen the widest gap between official rates and real rates in history, suggesting that irrespective of what the BofE says, rates will go where they want to go. And that is where the markets - supply and demand for money - tells them to go.
The government doesn't pay interest based on its on base rates. It pays interest based on whatever it borrowed that money at - rates set by debtor nations, by the World Bank, by the yields set at the time of gilt auctions etc.
The real issue Bendix is that we live on an island. Where we are immune to global events. Even the financial crash was created in the USA. No British based banks were even slightly involved in events.
Wage inflation will make all the problems disappear overnight. No one will have to work that bit little harder or longer to create real growth and wealth.0 -
Thrugelmir wrote: »Wage inflation will make all the problems disappear overnight. No one will have to work that bit little harder or longer to create real growth and wealth.
For this prediction to come true we have to have wage inflation, otherwise prices will naturally deflate on reduced demand (through cost).
That is the point at the moment, we arn't really seeing wage inflation, so what inflation is increasing the base rate going to combat that is not going to decrease through decreased demand.
Unless people are predicting wage inflation also, I can't see base rate rising much as it could damage the economy.
Like you put above tax rises, no amount of rate increasing will stop that so we have an iron on extra 1% on our inflation rate next year.
What will increasing the cost of borrowing do to help fight that? other than take more money out of the economy?0 -
I agree that the overnight rate will only have a small bearing on longer tenors and that they have decoupled from market clearing saving and borrowing rates. However as they increase it is likely that the base rate will provide a floor for savings rates.People seem to think there is a mythical 'they' who raise interest rates. There isn't.
Interest rates are set by the market. The BGofE might change base rates, but unless there is a corresponding linkage to what is happening out there in the real world, it's a waste of energy.
The last year or so has seen the widest gap between official rates and real rates in history, suggesting that irrespective of what the BofE says, rates will go where they want to go. And that is where the markets - supply and demand for money - tells them to go.
The government doesn't pay interest based on its on base rates. It pays interest based on whatever it borrowed that money at - rates set by debtor nations, by the World Bank, by the yields set at the time of gilt auctions etc.I think....0 -
For this prediction to come true we have to have wage inflation, otherwise prices will naturally deflate on reduced demand (through cost).
No. If I work, as I do, 5 hours longer a week on my own projects, and earn an extra £25 per week. Thats not inflationary. As it will result from increased output or sales activity. Real growth.
If one of the organisations that I contract to increases my rate of pay by £25, yet I still work the same hours thats inflationary. As the additional cost will more than likely be passed onto customers as an increased selling price. They will do likewise until the consumer, the man on the street picks up the tab. Thats an inflationary spiral.0
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