How long can the BoE keep rates from rising?

Linton

Procrastinator333 wrote: »

I think most people miss the more important question. Does the boe WANT to curb inflation? While they will never state it publicly, there is clearly a policy of allowing / ignoring inflation. S.....

Whether the BOE wants to curb the current external commodity driven inflation is irrelevent. The simple fact is that they can't, it's a global effect. They are not in control of anything that would make any difference.

In any case, it is arguable as to whether increases in commodity prices is inflation. As I see it inflation is not merely an increase in price but rather a cycle - increase in prices leading to increase in wages which puts up prices even more. The economic constraints are preventing the cycle from starting.

RenovationMan

Sorry, but it doesn't make sense. If it was so simple and so obvious that raising interest rates would solve all our problems, why would the BoE not do it?

DervProf

RenovationMan wrote: »

Sorry, but it doesn't make sense. If it was so simple and so obvious that raising interest rates would solve all our problems, why would the BoE not do it?

The BoE could have solved excessive HPI a few years ago (and possibly limited out lenders exposure to the credit crunch), but they chose not to do it.

The reason the BoE won't increase interest rates until they have no choice is because they know that many people have a lot of debt. They'd better hope that a lot of that debt gets paid back before they have to put rates up, otherwise things might get quite nasty.

RenovationMan

DervProf wrote: »

The BoE could have solved excessive HPI a few years ago (and possibly limited out lenders exposure to the credit crunch), but they chose not to do it.

The reason the BoE won't increase interest rates until they have no choice is because they know that many people have a lot of debt. They'd better hope that a lot of that debt gets paid back before they have to put rates up, otherwise things might get quite nasty.

So you're saying that the BoE is right to keep rates low?

FTBFun

DervProf wrote: »

The BoE could have solved excessive HPI a few years ago (and possibly limited out lenders exposure to the credit crunch), but they chose not to do it.

What, the BOE is in charge of relaxing planning permission and thereby increasing the supply of housing now, is it?

The reason the BoE won't increase interest rates until they have no choice is because they know that many people have a lot of debt. They'd better hope that a lot of that debt gets paid back before they have to put rates up, otherwise things might get quite nasty.

Or, for the actual reason, that the economy is still not sufficiently healthy for an interest rate rise to be worthwhile.

DervProf

RenovationMan wrote: »

So you're saying that the BoE is right to keep rates low?

Not really.

To a certain degree they have their hands tied, due to previous reluctance to slow things down when the economy (property market) was heating up.

My call was for rates to be increased slightly during the "boom years" (around 04/05), but the mantra was "we don't target house prices, we only look at inflation". This allowed large amounts of personal debt to be built up. When the inevitable happened (despite nobody seeing it coming), it left many individuals highly exposed to their debts, so the BoE took the easy option. It isn't just that the BoE have not much room for manouver with interest rates, their reputation doesn't look too clever.

DervProf

FTBFun wrote: »

What, the BOE is in charge of relaxing planning permission and thereby increasing the supply of housing now, is it?

So, the reason for 10%+ HPI in the middle part of the last decade was purely to do with lack of supply of housing ? Funny that, as I spotted lots of new builds going up around then, far more than today.

I don't think supply is any healthier now, yet HPI is not on the menu.

HAMISH_MCTAVISH

DervProf wrote: »

So, the reason for 10%+ HPI in the middle part of the last decade was purely to do with lack of supply of housing ?

Yes.

Funny that, as I spotted lots of new builds going up around then, far more than today.

The plural of data is not "anecdote".

I don't think supply is any healthier now, yet HPI is not on the menu.

As rents are soaring instead.

DervProf

HAMISH_MCTAVISH wrote: »

The plural of data is not "anecdote".

Who's a pretty boy then ?

And you couldn't even repeat it properly. :rotfl:


Not so much a dead parrot, but a rubbish one.

Procrastinator333

Linton wrote: »

Whether the BOE wants to curb the current external commodity driven inflation is irrelevent. The simple fact is that they can't, it's a global effect. They are not in control of anything that would make any difference.

In any case, it is arguable as to whether increases in commodity prices is inflation. As I see it inflation is not merely an increase in price but rather a cycle - increase in prices leading to increase in wages which puts up prices even more. The economic constraints are preventing the cycle from starting.

Well, agree to disagree then. Imo, the desire of the boe to curb inflation has to come before the question of whether they can or can't. That desire is not there, so whether they have the tools to do it or not does not matter.