BOE FOCUS-Higher rates loom as BoE's credibility questioned

purch

Does help homeowners, and that's the sole reason a lot of people don't want them to rise, it's nothing to do with inflation when it comes to discussing this on a forum, it's all about what you want for your mortgage

I would like to point out that my borrowing is ZERO, and as a Cash rich person I am currently not gaining anything from a 1/2% base rate, other than not facing the deepest recession in the history of recessions.

As this thread is about "credibility" I do think that a signal from the Bank that a rise is now very high on their agenda or even imminent, would be a good thing.

HAMISH_MCTAVISH

mbga9pgf wrote: »

Look, I fully agree, but daily mail readers wont understand that. Perception is everything.

Forget the Mail, half the readers of this board don't understand it, and they really should by now with the number of times it's been discussed.

chucky

Graham_Devon wrote: »

Until chucky answered, and basically stated "it doesn't help".

the answer was pretty obvious, especially the number of times it has been explained to you.

Graham_Devon wrote: »

Something needs to be done about inflation. Oil is rocketing again today, once again nearer the $100 a barrel for Brent Crude.

that's not a base rate issue. that's an OPEC issue amongst others.

we will never get cheap oil.

Graham_Devon

lemonjelly wrote: »

...or may not.

I agree with the point you're trying to make Graham, and I agree you had to repeat the question because no-one answered. But you're missing the other side of the coin too mate.

chucky's reply's imply that raising IR's would be bad.

Your responses imply not raises IR's will be bad.

Thanks.

I do think there is more weight in saying that higher rates will help slow down the increase in inflation.

It won't combat it, which is always the question asked whenever someone suggests raising rates may help, but I think it will help slow down the acceleration.

It won't help on the VAT side of things.

But it may help with the pound. The pound being higher reduces our costs of buying oil and energy (two of the biggest inflationary pressures at the moment, after VAT), and the lower costs of buying energy, should make it's way through to food....which has the double whammy of higher base costs (wheat, sugar etc) and also higher transport costs due to a low exchange rate and high oil price.

I can't think of any way 0.5% rates are currently helping pull back, or slow down the acceleration in inflation. Chucky asked another poster how higher rates may help, so was interested in how he thought 0.5% rates help. To which I couldn't get an answer, so thought I would just keep asking.

As the use of interest rates is mainly to control inflation, surely the sitting on the fence has started to run it's course now. Yes, there are other aspects of the economy 0.5% rates help. But were talking inflation, and the economy apparently, what with record breaking rises in some sectors, appears to be recovering.

mbga9pgf

Interest rate rises will cause an increase in RPI.

chucky

Graham_Devon wrote: »

Chucky asked another poster how higher rates may help, so was interested in how he thought 0.5% rates help. To which I couldn't get an answer, so thought I would just keep asking.

As the use of interest rates is mainly to control inflation, surely the sitting on the fence has started to run it's course now. Yes, there are other aspects of the economy 0.5% rates help. But were talking inflation, and the economy apparently, what with record breaking rises in some sectors, appears to be recovering.

errr no - we were discussing something else

chucky wrote: »

how does increasing rates counteract the rise in inflation due to VAT?

it was interest rates and the increase in VAT and that impact on inflation.

it's usually best if you read and understand posts before you try to reply.

Graham_Devon

chucky wrote: »

that's not a base rate issue. that's an OPEC issue amongst others.

we will never get cheap oil.

This isn't what I'm talking about though is it.

I'm talking about exhange rates.

You know I'm not suggesting interest rates set the price of a barrel of oil. I'm talking about exchange rates, and how much oil we get for our pound.

I really don't see why you go round trying to tell everyone I don't understand, then try and muddy the waters with the above.

Graham_Devon

chucky wrote: »

errr no - we were discussing something else

it was interest rates and the increase in VAT and that impact on inflation.

it's usually best if you read and understand posts before you try to reply.

VAT is just one aspect of our current inflation problem. One I have already acknowledged interest rates won't affect.

The thread is about inflation in general, is it not? You already acknowledged were talkign general inflation when you said....

increasing rates will have little effect on the reasons that we have inflation or will have inflation.

mbga9pgf

Graham, its not going to help financial stability, as the exchange rate is helping lead an export market recovery... a market that was nailed through 13 years of labour inaction.

Unless you want the UK to focus on non-jobs, financial services and actually start producing stuff competitively internationally.

chucky

Graham_Devon wrote: »

This isn't what I'm talking about though is it.

I'm talking about exhange rates.

You know I'm not suggesting interest rates set the price of a barrel of oil. I'm talking about exchange rates, and how much oil we get for our pound.

I really don't see why you go round trying to tell everyone I don't understand, then try and muddy the waters with the above.

because you don't understand i have to explain things to you again and again.

what i'm trying to explain to you and Lemonjelly has said it too, is that there are more drivers when looking at the price of oil. it's not just the exchange rate. even increasing interest rates may not solve the issue.

if you increase rates to lower the price of oil you then kill the export market.