BOE MPC voted 6-3 to hold rates in Feb

RenovationMan

ILW wrote: »

Some of the unions are beginning to flex their muscles using "inflation at 4-5%" as a reason to push for higher settlements. It only takes a couple of the larger employers to cave in and a very nasty spiral can ensue.

Do we have any large employers any more? Especially outside the public sector where people are just glad to have a job at the moment.

Gone are the 70s when unions ruled and strikes could bring the country to a standstill. People are just happy to be in work and will keep their heads down (IMHO).

System

Radiantsoul wrote: »

I reckon a rise is likely is the next six months or so. But I can't see it being more than 0.25%. I can't see any real risk of runaway inflation, and so a delay in raising rates is not too bad. A premature increase seems far more damaging as it would probably dent business confidence and would be hard to reverse.

Agreed, I think they'll raise in it the summer by 0.25, then sit and wait until January when VAT drops out and hey presto, on target.

IveSeenTheLight

Generali wrote: »

TBH I have no idea. Deflation is still a risk as ex-tax inflation is low and the money supply continues to flat-line or even fall.

At present, the only big risk to inflation I can see would be an oil price shock. Something like a revolution in Saudi cutting off supplies and increasing oil a long way above what is being talked about now, putting $150 bbl in the shade.

The only other way inflation really takes hold without massive money supply increases (ms is falling) is wages going up and there is no sign of that right now.

So in essence, you would not believe there to be a need for base rate increases unless there is a substantial risk to oil prices i.e as you say a revolution in Saudi

Heyman_2

ILW wrote: »

What will you have to give up?

Nothing, we overpay into our j/a by about £300 a month at the moment so it'll just absorb it.

If rates keep going up it'll keep absorbing it, then if it goes over the excess it'll start eating into the cushion we've built up over the last couple of years.

Radiantsoul

ILW wrote: »

Some of the unions are beginning to flex their muscles using "inflation at 4-5%" as a reason to push for higher settlements. It only takes a couple of the larger employers to cave in and a very nasty spiral can ensue.

I can't really see it happening. I think most people expect that wages will stagnate for at least this year and that there standard of living will fall. Most will be happy to have a job and so strikes seem unlikely.

Generali

IveSeenTheLight wrote: »

So in essence, you would not believe there to be a need for base rate increases unless there is a substantial risk to oil prices i.e as you say a revolution in Saudi

Maybe. I'd put the emphasis on my first sentence. We really are in a situation that is unique so the is, by definition, no direct experience to fall back on.

You can look at analagous situations, eg Japan in late 1980s or US 1930s or even US 1870s but none are that close to what is happening now.

Any forecast from where we are now can be little better than guesswork IMO.