MSE News: Inflation up again - will base rate rise soon?

hallmark

0.5% IRs are a disgrace. Most especially when you see the loan rates banks are offering.

The MPC is a joke puppet organization that simply makes up whatever reason suits it to keep IRs as low as possible. When inflation is low, it says it has to keep IRs low because of what would happen now if it raised interest rates. When inflation is high, it says it has to keep IRs low because of what'll happen in a years time if it raised interest rates. And so on.

All the while savers are sacrificed in order to bail out the people who bought houses they can't afford.

Blackdog

I am sure interest rates will go up this year but there will be pressure to delay any rise until later in the year. I predict 0.25% rise in June followed by another 0.25% in September/October. There are likely to be more significant rises in 2012 and 2013 until they reach 4 or 5%. For all the savers out there it is a tragedy that rates have been so low for so long however borrowers should have made the most of it.

D1zzy

The Index linked certs @ RPI +1% are looking OK :j

Paulgonnabedebtfree

SnowMan wrote: »

First of all must say how pleased I am to see the RPI increase reported in the article and thread starter rather than CPI :T

It seems that one of the government means to reduce inflation is to invent an index that understates inflation (i.e. CPI) pretend that it does reflect inflation, when all the statisticians say otherwise, and then set monetary policy to that new target.

It is a familiar government ploy. We have seen when employment was rising in the past that the government of the day takes unemployed people out of the statistics as a method of reducing unemployment. The reality is that it is a sleight of hand not a solution to unemployment.

It does seem likely that with current monetary policy that real inflation as experienced by real people is in danger of getting out of control and looking at the Bank of England yield curves does seem to indicate (to someone who claims no expertise at interpreting these graphs) that base rate will have risen by 0.25% by about May time.

One of the Bank of England monetary commitee has been voting for a 0.25% increase in base rates and it is hard to believe that given their remit that he won't have company soon amongst the rest of the committee and we will see an increase.

The government fear that a base rate rise will stifle economic recovery of course so may be putting pressure on the committee, despite their supposed independence. But the counter-argument to leaving base rates where they are is that letting inflation get out of control will require a steeper rise in base rates in the future.

Inflation getting out of control does seem to be a UK problem.

I do sometimes wonder if the fact that we have a much higher level of property ownership (aka mortgages) in the UK (compared to many nations) is an extra shackle when determining base rate. It would seem to cause a much sharper decline in economic activity when rates rise than if more people rented. The opposite occurring when rates lower (usually anyway).
A lot of the property owning (alleged) democracy was brought about, at least in part, by the state wanting to curb industrial action - particularly all out strikes. It appears that there is a possibility that the state may have shot itself in the foot - possibly. Of course there are different leaders now than when MT was PM.
I don't present this as absolute fact because it's far more complex that that but it may be food for thought.

drewwa

hallmark wrote: »

All the while savers are sacrificed in order to bail out the people who bought houses they can't afford.

This generalised rhetoric is getting tiresome.

Not all mortgagees bought 'houses they couldn't afford'. Most can afford them, as they were paying and continue to pay the fixed interest rates they agreed with their banks/building societies prior to the drop in BoE interest rates in late 2008 and early 2009. Only a relatively small number have tracker mortgages and many of those have 'collars' which have prevented them benefiting from the low BoE interest rates.

Most mortgagees are also savers, either with independant funds or offsets.

Many savers are, and certainly almost all were at some point, mortgagees.

Relying on interest from savings as income is not a 'risk-free' option. The value of your investment can go up or down. A key take away from this economic downturn is, as ever, not to have all eggs in one basket.

I can appreciate that you're frustrated by the lack of interest on your savings, but can we dispense with the naive 'them and us'? It's not helpful and doesn't move the discussion on.

Cheers,

Drew.

hallmark

drewwa wrote: »

This generalised rhetoric is getting tiresome.
....
I can appreciate that you're frustrated by the lack of interest on your savings, but can we dispense with the naive 'them and us'? It's not helpful and doesn't move the discussion on.

My post was & is merely factual. Savers are being sacrificed to bail out people who bought houses they can't afford. It's a simple statement of fact. The only reason the MPC isn't raising IRs like it ought to be is because the Govt is terrified of what the effect would be on the housing market.

BTW FWIW you're making some wrong assumptions about how I'm invested, but that's not really the point.

ses6jwg

hallmark wrote: »

My post was & is merely factual. Savers are being sacrificed to bail out people who bought houses they can't afford. It's a simple statement of fact. The only reason the MPC isn't raising IRs like it ought to be is because the Govt is terrified of what the effect would be on the housing market.

BTW FWIW you're making some wrong assumptions about how I'm invested, but that's not really the point.

Should have bunged all your savings into the FTSE when it crashed like a lot of us did.
:j

Gray_colt

First of all im a saver and want interest rates to go up, here is what i think will happen. The bank of england knew inflation was up at 3.7% last week, they get this info before us. That in itself speaks a thousand words. I think inflation will get to around 4.2% and they wont raise rates from 0.5% One of the MPC the american will still vote for QE Stentance for a raise and the rest nothing. People have become used to low rates and the government +george osborune believe this inflation blip is temporary. George actually came out today and said the mpc are doing a good job with inflation. So there you have it guys. I hope im wrong but all evidence suggests 0.5% is the new 5%, I think this site is great and liked it even more when savers actually were savers instead of loosers, almost makes a mockery of the site, its name and martin. Sounds it/he be called money looser expert now?:(

Loughton_Monkey

Milarky wrote: »

FACTOID: UK balance of payments went negative in 1983 and stayed that way. It's a fact that never [STRIKE]changes[/STRIKE] goes out of date

Don't know how you define 'Factoid', but:

FACT Balance of payments 1997 Total Goods & Services 1997 £856 million Positive [Source Government Pink Book].

hallmark

ses6jwg wrote: »

Should have bunged all your savings into the FTSE when it crashed like a lot of us did.
:j

FTSE still very cheap IMO.