Interest rates set to rise again!

dannyboycey

http://news.bbc.co.uk/1/hi/business/6469747.stm

Guy_Montag

finger's crossed. 8% by mid-2008 - come on you can do it!

isitenough

Oh goody. Will my hubby's wages go up as well? No, I doubt it too.

Sisyphus

Forget CPI. The RPI (a more accurate measure of inflation imho) hasn't been this high since 1991.

Sisyphus

isitenough wrote: »

Oh goody. Will my hubby's wages go up as well? No, I doubt it too.

I know how you feel, but a lot of wage settlements are based on RPI. The Bank of England are aware of this and should want to act to nip it in the bud. However, their recent rate rises have been trailing the rise in inflation so it look like they're losing control.

dannyboycey

"February's figure is the highest RPI since August 1991, although there has been little sign of inflation in pay deals so far."

This is a really significant sign that something more drastic is on the horizon.

Generali

Maybe, maybe not. The divergence between the RPI and CPI is due to the fact that mortgage repayments are included in the RPI but not the CPI. Therefore, increasing interest rates increases the RPI temporarily.

The BoE has been told to target the CPI not the RPI so in principle, it doesn't matter that the RPI is rising.

IMHO, the CPI is a terrible measure of inflation - most people's biggest cost is the mortgage. It's ridiculous just to ignore it! However, it is the chosen measure and so is being targeted.

I still reckon house prices will fall though. Just no idea when.

Generali

I guess this shows what a lot of people have long suspected:

http://www.24dash.com/billpayments/18166.htm

For those that can't be bothered to read it, it says that the Bank of England deliberately fuelled the housing boom to prevent an economic downturn. Lets hope that any future asset bubble (e.g. houses) popping as a result doesn't turn into a massive depression.

F_T_Buyer

Generali wrote: »

I guess this shows what a lot of people have long suspected:

http://www.24dash.com/billpayments/18166.htm

For those that can't be bothered to read it, it says that the Bank of England deliberately fuelled the housing boom to prevent an economic downturn. Lets hope that any future asset bubble (e.g. houses) popping as a result doesn't turn into a massive depression.

I have to say, but House Price Crash has been saying that for years, all the while the Bank of England and politicians denied it - I have emails from them!

Xbigman

Generali wrote: »

I guess this shows what a lot of people have long suspected:

http://www.24dash.com/billpayments/18166.htm

For those that can't be bothered to read it, it says that the Bank of England deliberately fuelled the housing boom to prevent an economic downturn. Lets hope that any future asset bubble (e.g. houses) popping as a result doesn't turn into a massive depression.

What Eddie George meant was that when the world economy went into a decline they made a choice to cut rates knowing it would fuel house prices and debt but they considered it was the lesser of two evils. That has ended up as his legacy.

Of course that makes for a poor newspaper story.
Regards



X

Generali

Xbigman wrote: »

What Eddie George meant was that when the world economy went into a decline they made a choice to cut rates knowing it would fuel house prices and debt but they considered it was the lesser of two evils. That has ended up as his legacy.

Of course that makes for a poor newspaper story.
Regards



X

Have you seen a different report to this or is that your interpretation?

It's a pretty amazing admission IMO. For me, it implies that, despite being given price stability as an explicit goal, the BoE has deliberately stoked inflation.

Up until now, this inflation has mostly shown itself through asset markets (e.g. houses, art, fine wine) but seems to be creeping into the real economy for goods and services.