Mervyn King : "Inflation may not fall back as strong as expected"

Graham_Devon

[quote=[Deleted User];43547828]No sense in putting rates up until we get some growth in the economy.
Inflation isn't all bad in our current predicament - at least it is eroding the value of the nation's debts at a faster rate than we could pay it off. It will also help with the financial sector's dodgy assets which caused this mess in the first place.[/QUOTE]

It's not eroding debts at all.

It's only eroding peoples debts for whom have had a payrise over and above inflation. So people who are seeing payrises of say 5% plus.

For everyone else, especially those with no payrises this year and last it's making debt harder to service.

For most, based on average payrises, debt is getting harder to service due to inflation, not easier, as they have less money left after all the commodity rises each month.

[Deleted User]

Graham_Devon wrote: »

It's not eroding debts at all.

It's only eroding peoples debts for whom have had a payrise over and above inflation. So people who are seeing payrises of say 5% plus.

For everyone else, especially those with no payrises this year and last it's making debt harder to service.

For most, based on average payrises, debt is getting harder to service due to inflation, not easier, as they have less money left after all the commodity rises each month.

Wrong. Inflation is reducing the national debt which I was clearly referring to as well as personal debts because by definition inflation is reducing the value of the currency it is measured in.

Of course people are struggling at the moment. There are no painless solutions to the current problem. Raising rates and damaging the economy further would just make things worse. Inflation has positive and negative elements something that seems to be lost on some posters on here. We desperately need growth, and low rates help.

lemonjelly

Perhaps everyone moaning about low interest rates should be jumping on NS&I's ILSC's to protect their capital?

chucky

before the usual suspects try to deliberately mislead people, the cost push/imported inflation that we have now is unlikley to be here medium/long term so the disposable income argument is very weak.

inflation means that the amount you owe is less in real terms than it used to be, provided the interest rate is less than the rate of inflation.

just like house prices can be worth less in real terms so will debt.

lemonjelly

[quote=[Deleted User];43552968]Of course people are struggling at the moment. There are no painless solutions to the current problem. Raising rates and damaging the economy further would just make things worse. Inflation has positive and negative elements something that seems to be lost on some posters on here. We desperately need growth, and low rates help.[/QUOTE]

Whilst I agree in general terms, I would argue that the case that there is growth has yet to be proven, which may be why a lot of people continue to be concerned.

[Deleted User]

lemonjelly wrote: »

Whilst I agree in general terms, I would argue that the case that there is growth has yet to be proven, which may be why a lot of people continue to be concerned.

Fair point, but if there is no growth then the argument for low interest rates is even stronger, unless inflation goes way above its current level.

The BoE can only act on the information they have and at the moment they are, in my view, making the right decisions.

ILW

[quote=[Deleted User];43554668]Fair point, but if there is no growth then the argument for low interest rates is even stronger, unless inflation goes way above its current level.

The BoE can only act on the information they have and at the moment they are, in my view, making the right decisions.[/QUOTE]

What would you consider to be an unacceptable level of inflation that require action?

Thrugelmir

One fund manager yesterday made the observation that its the amount of financial stimulus in the global economy that's impacting on commodity prices. As the cash injected by QE and bank support schemes will surface somewhere and push up asset prices.

[Deleted User]

ILW wrote: »

What would you consider to be an unacceptable level of inflation that require action?

What stupid question. Inflation is only one factor in the rates decision. What you do with rates depends on the current levels of inflation AND growth, forecasts for both, etc, etc.

The decision just isn't as simple as you seem to think.

ILW

[quote=[Deleted User];43555124]What stupid question. Inflation is only one factor in the rates decision. What you do with rates depends on the current levels of inflation AND growth, forecasts for both, etc, etc.

The decision just isn't as simple as you seem to think.[/QUOTE]

I your previous post you stated that things would need to be done "if inflation went way over it's current level", just wondering what you meant by "way over".