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

Graham_Devon

chucky wrote: »

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.

increasing interest rates may not solve the issue.

I agree.

You have now acknowledged there is an issue. What I wanted to know from you, was how the current rates solve it. You cannot, or will not, answer that. If I were a gambling man, which I am, I'd side on the "cannot" answer.

Were also back to "solving". I don't think interest rates themselves can solve inflation right now.

But taking your foot off the accelerator slightly can help reduce the impact of a car crash...keeping your foot on the accelerator if you are going to crash doesn't help the impact of that crash in the slightest. What some are saying is "ahh well, gonna have a car crash anyway, so may aswell do nothing to try and reduce the impact".

Graham_Devon

chucky wrote: »

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.

Chucky, give it a rest mate.

I'm not stupid. I don't think interest rates set the price of oil and that is the end of it. I do know there are loads of influences on the price of oil, most outside of the UK's control.

I've focused soley on the echange rate in this thread. Going to lengths to explain what I mean by echange rates, and how it may help our situation.

Please, give up on trying to suggest I'm saying something else, when I'm not, while at the same time, trying to tell me I won't understand over and over again.

It's quite clear I understand from the lengths I've gone to to explain what I'm talking about.

chucky

Graham_Devon wrote: »

I agree.

You have now acknowledged there is an issue. What I wanted to know from you, was how the current rates solve it. You cannot, or will not, answer that. If I were a gambling man, which I am, I'd side on the "cannot" answer.

Were also back to "solving". I don't think interest rates themselves can solve inflation right now.

But taking your foot off the accelerator slightly can help reduce the impact of a car crash...keeping your foot on the accelerator if you are going to crash doesn't help the impact of that crash in the slightest. What some are saying is "ahh well, gonna have a car crash anyway, so may aswell do nothing to try and reduce the impact".

Graham, as i mentioned previously i was talking about inflation due to VAT and base rates. increasing base rate has zero effect on this. myself and mbga were discussing inflation due to VAT and the politics around it.

rates going up will be politically motivated or to try to show that the recovery is in full flow, they will have very little to do with economics.

ps. i'll give it a rest when you stop you nonsense. if you had any interest in stopping you would have stopped a long, long time ago.

lemonjelly

I see your point Graham.

To an extent, I agree that the BoE are basically just trundling along, & not doing anything in the hope that things work out. We've seen that their predictions over the past 5 years have been woeful.

I think what a couple of posters are trying to say (a little harsher than is needed guys - please be nice to moneysavers...) is that a proportion of current inflation (not all) is not down to things which could be contralled/affected by IR rises or cuts.

For example, as I said oil prices are rising, but this is due to problems in alaska. Rising IR's will not combat this rising price, and therefore inflation will continue to rise (I am oversimplifying here).

Rising IR's will mean that a proportion of the population will reduce spending, because they will be paying more in mortgage costs (possibly), or will be hoping savings rates rise too, so will start looking at saving options.

chucky is right that exports are going well, & this is helping the economy.

At the same time, everyone in the UK is having household income squeezed through VAT, increased food prices, inflation, fuel costs etc. So we are struggling a bit.

Rising IR's might make things a tiny bit better for drivers & hauliers, but then manufacturers would lose out as their exports would be (comparitively) more expensive.

So I think the question is, are IR's the only option to stem inflation? (clearly not, as there are other factors on inflation). Therefore what else can we do to stimulate the economy.

olly300

Graham_Devon wrote: »

C.

I've focused soley on the echange rate in this thread. Going to lengths to explain what I mean by echange rates, and how it may help our situation.

One of the significant problems at the moment is the number of unemployed.

Raising interest rates to strengthen the pound will not help businesses particularly exporters.

Plus OPEC refused in December to pump more oil as the high price helps their economies.

Edited to say: OPEC knew there was a problem with oil before the Alaska leak.

chucky

lemonjelly wrote: »

I think what a couple of posters are trying to say (a little harsher than is needed guys - please be nice to moneysavers...) is that a proportion of current inflation (not all) is not down to things which could be contralled/affected by IR rises or cuts.

you reap what you sow

lemonjelly wrote: »

So I think the question is, are IR's the only option to stem inflation? (clearly not, as there are other factors on inflation). Therefore what else can we do to stimulate the economy.

the money supply can be used to deal with inflation - how immediate it is another question.

chucky

olly300 wrote: »

One of the significant problems at the moment is the number of unemployed.

Raising interest rates to strengthen the pound will not help businesses particularly exporters.

Plus OPEC refused in December to pump more oil as the high price helps their economies.

Edited to say: OPEC knew there was a problem with oil before the Alaska leak.

the next OPEC meeting is not until June, so there won't be any changes here IMO...

lemonjelly

chucky wrote: »

the money supply can be used to deal with inflation - how immediate it is another question.

Usually takes 9-12 months for QE to visibly take effect doesn't it?

purch

Usually takes 9-12 months for QE to visibly take effect doesn't it?

Nobody knows.

It's all guesswork :eek:

chucky

lemonjelly wrote: »

Usually takes 9-12 months for QE to visibly take effect doesn't it?

that's what i understood the schedule to be when QE started.

i'd go with Purch's answer though, too much has gone on to be able to predict anything accurately.