ECB raises rates to 1.5%

angrypirate

http://www.bbc.co.uk/news/business-14061912

How far behind will the BOE be?

Heyman_2

Quite some way I reckon.

Generali

I have long maintained that the joker in the pack is a sterling crisis. If other countries raise rates and the UK doesn't then the pound may fall quite quickly. That would force the BoE's hand.

angrypirate

Strangely, the pound is currently up on the dollar since this morning - currentl 1.12....although down from last months 1.14 (on the 15th June).

abaxas

Generali wrote: »

I have long maintained that the joker in the pack is a sterling crisis. If other countries raise rates and the UK doesn't then the pound may fall quite quickly. That would force the BoE's hand.

Potential massive import inflation too?

So basically we get screwed on inflation then rates. Ouch

Generali

abaxas wrote: »

Potential massive import inflation too?

So basically we get screwed on inflation then rates. Ouch

I have said the problem is going to be managing the recovery and getting back to normal.

Mr_Mumble

Generali wrote: »

I have long maintained that the joker in the pack is a sterling crisis.

In the past five years Sterling has fallen 40% against the Aussie dollar (you timed that emigration well!) and the Swiss Franc. The Sterling index is fractionally above its all time low of early 2009 when the trillions on the balance sheets of RBS, Lloyds/HBOS et al were a huge burden.

It begs the question, if Sterling is not in crisis now at what point is it in crisis and at what point does the BoE MPC go from ignoring inflation targeting to doing its legally mandated job. If inflation at 2-3 times the target doesn't make the BoE budge why would inflation at 4-5 times the target of 2% make the BoE act?

Generali

Mr_Mumble wrote: »

In the past five years Sterling has fallen 40% against the Aussie dollar (you timed that emigration well!) and the Swiss Franc. The Sterling index is fractionally above its all time low of early 2009 when the trillions on the balance sheets of RBS, Lloyds/HBOS et al were a huge burden.

It begs the question, if Sterling is not in crisis now at what point is it in crisis and at what point does the BoE MPC go from ignoring inflation targeting to doing its legally mandated job. If inflation at 2-3 times the target doesn't make the BoE budge why would inflation at 4-5 times the target of 2% make the BoE act?

The problem of a falling pound isn't really inflation as you just get a one off hit. The problem is the fall in living standards as imported products get more expensive. I was shocked by the prices in the wine aisle! Obviously most of that is imported product.

The UK is a trading nation and it needs to be able to import as well as export.

purch

The problem facing the Eurozone, is that the ECB wants to control money supply and interest rates, to, as Trichet says “create price stability for the 331 million federal citizens of the Eurozone.”

Unfortunately Claude and his chums cannot really control money supply within it's member states, and the likely outflows of money from the weaker nations to stronger ones can only lead to deflation and recessions in these states in the medium term.

We do have to be concerned that even though we are not members of the EUR club, we may suffer some of the consequences, and a potential GBP crisis is not out of the question further down the road.

Milarky

Mr_Mumble wrote: »

It begs the question, if Sterling is not in crisis now at what point is it in crisis and at what point does the BoE MPC go from ignoring inflation targeting to doing its legally mandated job. If inflation at 2-3 times the target doesn't make the BoE budge why would inflation at 4-5 times the target of 2% make the BoE act?

There seems to be a point in every story when tragedy turns to farce. We are not yet at that point. Mervyn knows this and so long as he can keep from dropping his trousers the prospect of gold-plated pensionhood beckons.

Thrugelmir

abaxas wrote: »

Potential massive import inflation too?

Though discourages expenditure on non-essentials and makes foreign travel more expensive. Which all aids the UK economy and enable the balance sheet to recover.