Once inflation rises interest rates will rise rapidly as well

Really2

So are we are going to see a boom with inflation caused by monetary expansion?

Funny how that always gets missed out when this IR rate gets banded about.


The guy is saying if we have a QE caused boom fueled by a wage-price cycle we could see 8% Base rate.

Surely would be the last thing anyone wanting a crash would want?

IveSeenTheLight

Milarky wrote: »

Even the BOE admit it hasn't worked....

With VAT increasing by 2.5% in January, surely we'll see a jump in inflation from then.

chucky

Element47 wrote: »

"To keep inflation down to only 10%... the economy has to tolerate interest rates of perhaps 8%. The risk is that households will not... reduce their debts by enough, and so the economy will not be able to tolerate this... Rates may have to be kept lower for an aditional 9 months and the consequence will be inflation peaking at 20%."

Andrew Lilico Policy exchange

rates ain't going anywhere over 2%-3% for a long time

matimage

Headlines like these make me wee my pants.

Wife and I earn a nice wage and like in a 3 bed semi, nothing flashy, worth about 200k possibly and have mortgage of £130k. Paying 3% at mo. If rates go up that much, we would be stuffed, and me, wife and 2 kids would be out on ear. I know interest rates have been high before (as one of my older friends keeps telling me) but house prices were more sensible then and more inline with wages (i think ).

Can interest rates really get that high again?

Generali

matimage wrote: »

Can interest rates really get that high again?

History tells that base rates are more likely to be > 10% than < 1% and I think that it's very likely that I will see base rates of > 10% before I die (I'm 39) and very unlikely that after the current mess clears that I'll see base rates of < 2% in the same period.

Really2

Generali wrote: »

History tells that base rates are more likely to be > 10% than < 1% and I think that it's very likely that I will see base rates of > 10% before I die (I'm 39) and very unlikely that after the current mess clears that I'll see base rates of < 2% in the same period.

I agree if you look at history (it has happened in our life time so it could happen again)

But that would also presume we should see an inflationary boom like in the 70's or 80's.

I think our economy will look a lot more stagnant, it may be me being blinkered but I can't see us having those huge progressive shifts.
We look like a mature economy now, unless something sparks a boom say renewable energy, I think it will be hard to replicate those times.

RDB

Generali wrote: »

History tells that base rates are more likely to be > 10% than < 1% and I think that it's very likely that I will see base rates of > 10% before I die (I'm 39) and very unlikely that after the current mess clears that I'll see base rates of < 2% in the same period.

If you are right then how can anyone who bought a house last few years keep up with mortgage payments?

What happened last time this cycle happened?

michaels

I suspect that may not sound so sensible translated in to Japanese?

Generali wrote: »

History tells that base rates are more likely to be > 10% than < 1% and I think that it's very likely that I will see base rates of > 10% before I die (I'm 39) and very unlikely that after the current mess clears that I'll see base rates of < 2% in the same period.

Radiantsoul

matimage wrote: »

Headlines like these make me wee my pants.

Wife and I earn a nice wage and like in a 3 bed semi, nothing flashy, worth about 200k possibly and have mortgage of £130k. Paying 3% at mo. If rates go up that much, we would be stuffed, and me, wife and 2 kids would be out on ear. I know interest rates have been high before (as one of my older friends keeps telling me) but house prices were more sensible then and more inline with wages (i think ).

Can interest rates really get that high again?

Yeah, but it probably won't happen soon. There are two many people who are in a similiar position to you. And so the situation would have to be pretty dire for a government to suddenly act in that manner. A lot of debt needs to be repaid first.

Radiantsoul

RDB wrote: »

If you are right then how can anyone who bought a house last few years keep up with mortgage payments?

What happened last time this cycle happened?

A lot of people lost their houses in the 1990s and real house prices fell below the 1987-88 peak for about a decade.