ECB raises rates to 1.5%

shortchanged_2

RenovationMan wrote: »

I dunno if that would pass an MOT in this country though.

RenovationMan

shortchanged wrote: »

I dunno if that would pass an MOT in this country though.

Looks a bit 'rugged' but serves the purpose. Perhaps it's time we reverted back to a slower pace of life?

Fuel poverty is only going to get worse as we reach peak oil (thanks AD9898) and so people should prepare themselves. We live in a village with a decent highstreet and bus and train connections. I would imagine that property in these sorts of areas will be at a premium over the next 50 years until we invent the fusion jet pack.

ILW

Why do higher IRs curb inflation in Europe, but not in the UK?

RenovationMan

ILW wrote: »

Why do higher IRs curb inflation in Europe, but not in the UK?

http://online.wsj.com/article/SB10001424052702303544604576431942819145846.html?mod=googlenews_wsj

"Keynesian economists have long argued that the ECB's focus on inflation is wrong-headed and ultimately self-defeating. In part, that's because in seeking to pursue monetary policy to suit Germany and other core economies it is condemning the periphery to debt deflation."

Compared to Germany, we are in the 'periphery'.

"Germany's manufacturing sector is growing at a scorching pace. Orders jumped 23% on the year to May. And it's no longer just an export phenomenon; much of this upturn is credited to a hefty jump in domestic demand. German orders rocketed 11% on the month. German unemployment levels are at their lowest since the start of 1992 and though earnings growth has been well-behaved so far this year, economists expect wage demands to pick up to levels that could spur a domestically generated inflation cycle next year."

Read that paragraph and then try to apply it to the UK. 23% growth? 'orders rocketing'?

"To hold German inflation at 2%, the ECB will have to keep raising interest rates. But given that peripheral euro-zone economies are already struggling to grow, rate rises will only cripple them further. "

Thank god we are not in the Euro.

ILW

My point was not whether it was good or bad to raise rates, but rather the g=fact that the BoE keep saying that a raise in rates would not affect inflation as it is all due to outside influences. Why is this different for say Germany, as far as I know they do not have massive oilfields.

RenovationMan

ILW wrote: »

My point was not whether it was good or bad to raise rates, but rather the g=fact that the BoE keep saying that a raise in rates would not affect inflation as it is all due to outside influences. Why is this different for say Germany, as far as I know they do not have massive oilfields.

"Germany's manufacturing sector is growing at a scorching pace. Orders jumped 23% on the year to May. And it's no longer just an export phenomenon; much of this upturn is credited to a hefty jump in domestic demand."

While raising rates might have negligible impact on imported inflation, it definitely has an impact on internally created inflation. Germany has had a 'hefty jump' in internal demand, so to dampen that down they raise rates to dissuade their citizenry from borrowing money to buy consumer goods and do dissuade their companies from borrowing money to feed a manufacturing led boom.

Thrugelmir

abaxas wrote: »

The issue, is the 'non essential' items are often made in the UK. And you cant stop people buying food!

In the credit boom years the biggest export market in the world for BMW was the UK.

The majority of the £324 billion of equity release from property was partied away. Not invested in income generating or wealth creating ventures. So hardly surprising the economy is running along but standing still.

As has been said a few posts back. The economy is going through a painful rebalancing. Which a weak £ is actually taking the sting out of.

wymondham

Would be nice to have anotther 1% on rates here..... oops, sorry forgot we need to encourage spending (money we havent got) and not saving...

purch

Why do higher IRs curb inflation in Europe, but not in the UK?

They don't.

But they will curb potential inflationary pressures in Germany.

The ECB sets rates for Germany.

The rest of the Eurozone either keeps up, or fails.......:eek:

MacMickster

The last thing that the PIIGS need now is higher interest rates in the Eurozone. Germany and France get what they want/need and everywhere else in the Euro has an interest rate that they neither want nor can influence.