BOE in rate shocker

nearlynew

Good news for debt-junkies.

Bad news for savers.

Really2

lemonjelly wrote: »

http://www.bbc.co.uk/news/business-13713283

Interestingly, eurozone rates look set to rise in a months time.

Bit wierd that, making the decision & announcement a month early!

That's where the on glove fits all kills, it ain't going to help Greece, Ireland and Portugal one bit.

lemonjelly

Graham_Devon wrote: »

Even more bizzare is the fact they wish to raise them to curb inflation.

Considering the biggest factors pushing their inflation up are fuel (transport), fuel (domestic) and clothing, they must be absolutely insane.

Do they not realise they cannot control these things!?

In your attempt at a dig, you missed off food - the main driver of current world inflation.

That said, rising IR's won't affect the price of fuel, energy or clothes... At least you're right on that point.:)

Graham_Devon

lemonjelly wrote: »

In your attempt at a dig, you missed off food - the main driver of current world inflation.

That said, rising IR's won't affect the price of fuel, energy or clothes... At least you're right on that point.:)

In your attempt at a dig back (though I was never having a dig at you), food isn't currently one of the main drivers of inflation in the Eurozone.

Oh and...

ChiefGrasscutter

Graham_Devon wrote: »

Even more bizzare is the fact they wish to raise them to curb inflation.

Considering the biggest factors pushing their inflation up are fuel (transport), fuel (domestic) and clothing, they must be absolutely insane.

Do they not realise they cannot control these things!?

Eh?
the ECB in pushing the euro base interest rate up will make the euro go up and thereby make the costs of the said inported fuel etc cheaper in euro terms:- thereby easing the pressure on inflation. We're assuming here the majority of the inflation is imported inflation rather the domestic/wage inflation.
A rising euro won't help exports from the euro zone I grant you.

There is an addional possibility that raising rates and the resulting increase in money coming into the economy/zone from outside might actually make it easier for SME's etc to borrow money as there will be more of it around looking for a home.

I'm sure the BofE can produce an explanation why this wouldn't work in the UK if applied to the UK base rate

Really2

ChiefGrasscutter wrote: »

There is an addional possibility that raising rates and the resulting increase in money coming into the economy/zone from outside might actually make it easier for SME's etc to borrow money as there will be more of it around looking for a home.

There is also a possibility that economies that of been bailed out could suffer more and need further help or could default due to not being able to devalue their currency to enable export growth.

As a whole the euro zone has reasonable growth so most probably the backing of the decision. But for one thing it will be bad for those countries in trouble.

Really2

Graham_Devon wrote: »

In your attempt at a dig back (though I was never having a dig at you), food isn't currently one of the main drivers of inflation in the Eurozone.

Oh and...

To settle a dig.

http://www.washingtonpost.com/business/european-central-bank-to-commit-to-fight-against-inflation-as-fed-bank-of-england-stay-put/2011/06/07/AGD7zBLH_story.html

But for now, the eurozone’s chief monetary authority is worried that steep oil and food prices will build up inflation expectations and is seen hiking rates at least twice by year-end from the current 1.25 percent

lemonjelly

Graham_Devon wrote: »

In your attempt at a dig back (though I was never having a dig at you), food isn't currently one of the main drivers of inflation in the Eurozone.

Oh and...

Hmmm

The FT has a page on food prices. Fears of drought, fears of crop failures, the G20 target volatile food prices and the FAO expect a continuation of high food prices.
http://www.ft.com/foodprices

Food inflation is at a 2 year high: http://www.walletpop.co.uk/2011/06/08/how-much-food-price-inflation-hits-two-year-high/

World food prices at record highs as inflation picks up (according to bloomberg): http://www.bloomberg.com/news/2011-05-05/food-prices-approach-record-high-as-grain-prices-fuel-inflation-worldwide.html

CNBC warns that the spector of inflationary food prices is being mistakenly overlooked by far too many people: http://www.cnbc.com/id/41831886/No_Inflation_That_s_Not_What_Food_Prices_Are_Saying

I'd suggest that internationally, food prices could come to be bigger/equal in importance to oil prices over the next 2 years.

Really2

lemonjelly wrote: »

I'd suggest that internationally, food prices could come to be bigger/equal in importance to oil prices over the next 2 years.

But Chicken nuggets will still be £1 at Iceland.:)

Graham_Devon

lemonjelly wrote: »

Hmmm

The FT has a page on food prices. Fears of drought, fears of crop failures, the G20 target volatile food prices and the FAO expect a continuation of high food prices.
http://www.ft.com/foodprices

Food inflation is at a 2 year high: http://www.walletpop.co.uk/2011/06/08/how-much-food-price-inflation-hits-two-year-high/

World food prices at record highs as inflation picks up (according to bloomberg): http://www.bloomberg.com/news/2011-05-05/food-prices-approach-record-high-as-grain-prices-fuel-inflation-worldwide.html

CNBC warns that the spector of inflationary food prices is being mistakenly overlooked by far too many people: http://www.cnbc.com/id/41831886/No_Inflation_That_s_Not_What_Food_Prices_Are_Saying

I'd suggest that internationally, food prices could come to be bigger/equal in importance to oil prices over the next 2 years.

I didn't say it wasn't a factor, I said it wasn't one of the main drivers....

I agree with the rest of your post. And I'm seriously wondering why you took what I said as a dig towards you earlier on. I'm not sure what you took as a dig, maybe it was because I quoted you? But apologies you took it that way. Obviously wasn't meant that way.

In April 2011, the lowest annual rates were observed in Ireland (1.5%), the Czech Republic (1.6%) and Sweden (1.8%), and the highest in Romania (8.4%), Estonia (5.4%), Lithuania and Hungary (both 4.4%). Compared with March 2011, annual inflation rose in sixteen Member States, remained stable in two and fell in eight.

The main components with the highest annual rates in April 2011 were transport (5.9%), housing (5.0%) and alcohol & tobacco (3.4%), while the lowest annual rates were observed for communications (-0.9%), recreation & culture (0.9%) and household equipment (1.0%). Concerning the detailed sub-indices, fuels for transport (+0.56 percentage points), heating oil (+0.21) and electricity (+0.12) had the largest upward impacts on the headline rate, while telecommunications (-0.12), vegetables (-0.10) and rents (-0.09) had the biggest downward impacts.

The main components with the highest monthly rates were clothing (2.6%), transport (1.1%) and housing (0.6%), while the lowest were communications (-0.4%), education (0.0%) and recreation & culture (0.1%). In particular, garments (+0.11 percentage points), fuels for transport (+0.07) and air transport (+0.06) had the largest upward impacts, while vegetables, telecommunications and restaurants & caf!s (-0.03 each) had the biggest downward impacts.