When interest rates to go back to normal many more distressed sellers?

Graham_Devon

HAMISH_MCTAVISH wrote: »

Obviously not.

But you do seem to be able to ask complicated questions.

Sorry if they are complicated

Banks do however reduce margins to compete with each other.

So do Asda and Tesco. But the price of bread, milk and petrol still rises when the base line costs rise.

And given the only way the economic recovery will be strong enough to justfiy significant base rate rises is if bank lending has improved markedly, then competition will also have returned, reducing margins.

I wasn't talking significant. Just rises.

The VAT rise would have fallen out now, but we just raised VAT again. So now it'll be another year. Pretty simple concept.

Might be a pretty simple concept. But it doesn't actually fit what we are seeing in the inflation rates, or what we are seeing said on this forum about VAT regarding inflation.

Concept and reality are two different things. I'm talking reality.

Look at CPI-Y, which excludes tax, and inflation is right around the 2% target.

Yup, this was said all through last year too...and CPI just kept increasing. Temporary, I believe it was called?

whatyadoinsucka

people keep suggesting base rates at 'normal' rates of say 4-7%, but the normal rate for the past 20 months have been 0.5%

We are not in normal times. look at japan whose economy has been dire for as long as remembered there base rate is still at nearly 0%,

Graham_Devon

whatyadoinsucka wrote: »

people keep suggesting base rates at 'normal' rates of say 4-7%, but the normal rate for the past 20 months have been 0.5%

We are not in normal times. look at japan whose economy has been dire for as long as remembered there base rate is still at nearly 0%,

Well hopefully, we'll follow Japan.

:whistle:

RenovationMan

Graham_Devon wrote: »

Well hopefully, we'll follow Japan.

:whistle:

I'm keeping my fingers crossed.

Graham_Devon

RenovationMan wrote: »

I'm keeping my fingers crossed.

Why doesn't that surprise me

ash28

Graham_Devon wrote: »

Can I ask a couple of simple questions?

1. When was the last time BOE interest rates went up, and mortgage rates didn't follow, and banks decided to absorb the interest rate rises to be nice to the population?

2. Howcome all of a sudden, the only part of inflation being talked about, is domestic UK inflation? I've not really seen this before. We just talked CPI. Now we got to talk about specific parts of inflation, and ignore the rest. We also have to ignore the fact that the VAT rise in Jan 2010 was supposed to have fallen out by now but hasn't. Instead, we just have to continue saying it will fall out....at some point, maybe, some time, hopefully.

3. Howcome last time we had external inflation pressures....interest rates were put up in an attempt to control inflation (2005/6). Yet now, if you believe certain people, this simply cannot happen, and wouldn't happen, and it's hilarious to even suggest it.

I thought the vat rise this month would have just replaced the vat rise of last year

In normal times the drivers of inflation are supply and demand for goods and services - too much money chasing goods and services puts the prices up - usually seen during an economic boom - reduce that money by increasing interest rates and or taxes and the demand falls - so does inflation.

What we seem to be seeing atm is cost push inflation driven by higher commodity and energy prices - plus of course increased taxes on the domestic front.

If BoE raise rates it might make sterling stronger regarding commodities and imports but on the other hand it would probably reduce demand here as people would have less money to spend (those with debt and mortgages), businesses would have less money if they had debt and would probably put their prices up, the cost of exports would rise because of stronger sterling, which would reduce export demand, this would probably dampen the economy too, as companies produced less because overseas purchasers find the goods too expensive, people would save more, higher interest rates make saving an attractive option - which would take even more money from the economy.

People could lose their jobs if companies started to sell less both domestically and overseas, the tax take for the government would fall because of the increase in people on benefits and the effect falling demand would reduce the vat take too - so overall government spending would probably increase.

The effect on the economy may be far from good - IMHO the BoE is between a rock and hard place.

novazombie

Its obvious 0.5% is not normal as over 15% would not be normal. Something between 5-10% is probably what most people would consider normal and healthy with a little room either side.

whatyadoinsucka

novazombie wrote: »

Its obvious 0.5% is not normal as over 15% would not be normal. Something between 5-10% is probably what most people would consider normal and healthy with a little room either side.

but the economy or the world is not normal.. Therefore it is safer to rely on the most recent ie 20 months (soon to be 21 months at 0.5%)

Only Savers actually care that the rates need to go up, no other factors significantly influence this.

Really2

ctrlaltdelete wrote: »

W

You are not thinking about the worldwide crisis,

For the point of the thread that is a good thing? UK rates effect the UK.

Really2

Graham_Devon wrote: »

Can I ask a couple of simple questions?

1. When was the last time BOE interest rates went up, and mortgage rates didn't follow, and banks decided to absorb the interest rate rises to be nice to the population?

2. Howcome all of a sudden, the only part of inflation being talked about, is domestic UK inflation? I've not really seen this before. We just talked CPI. Now we got to talk about specific parts of inflation, and ignore the rest. We also have to ignore the fact that the VAT rise in Jan 2010 was supposed to have fallen out by now but hasn't. Instead, we just have to continue saying it will fall out....at some point, maybe, some time, hopefully.

3. Howcome last time we had external inflation pressures....interest rates were put up in an attempt to control inflation (2005/6). Yet now, if you believe certain people, this simply cannot happen, and wouldn't happen, and it's hilarious to even suggest it.

1) don't know date, but It is never for the reason you state, it is for competition as mention many times in this thread. When was the last time they went down and it was not passed on, of cause it can;t happen on the way up can it. If that was the case would rates not be near 100% now after all the historical rises and falls?

2) the 2010 vat rise will not have fallen out as we have a VAT rise in 2011? Are you Joking? (I hate to think how many times this has been discussed now)

3)Because the economy was thought to be able to cope with it.