Rising Interest Rates

Guy_Montag

Generali wrote: »

Oh well. There goes my fiver.

You should have spent it last year when it was worth 16p more:eek:

Generali

Guy_Montag wrote: »

You should have spent it last year when it was worth 16p more:eek:

16p? Haven't you seen the money supply figures - M4 up 14.4% in the year to Feb. GDP growth 3%. I make that inflation of about 11%!

vansboy

The simple problem with ,25% rate changes, up OR down, is that the effect isnt felt instantly.

The trickle effect takes time to show, then when you have a bit of home budget balancing, a month or 3 down the line, is when you KNOW things have changed!!

Good or bad?!!

VB

mystic_trev

The FT are suggesting that IR's may have to go above 6% to control Inflation!

http://www.ft.com/cms/s/e654cda8-ed06-11db-9520-000b5df10621.html


"if there is any sign that public expectations of inflation are drifting upward, then the Bank must act to ensure its credibility. If that means interest rates of 6 per cent plus, then so it must be"

ManAtHome

I have revised my forecast of May MPC meeting votes...

0.5% rise - 2 votes
0.25% rise - 5 votes
no change - 1 vote
4.5% cut - 1 vote

Minutes:
We have decided in favour of a precautionary rise until the reduction in price of the vastly-increased weighting of gas and electricity in the Cheese and Plasma Index kicks in. There was protracted discussion about removing 33% of the food weighting from the index entirely as the practice of government-funding of lunch is now long-established - this will be implemented in due course (14th May 2007).

One member voted for a 4.5% cut in rates as he can manage satisfactorially without making purchases in the UK. From next month we will therefore be assuming that 11% of the public will be purchasing essentials outside the UK (Albania being the most comparable within Europe) and will adjust the index accordingly.

Together with our draconian increase this month, this will ensure that inflation will rapidly drop back to target.

mystic_trev

ManAtHome wrote: »

One member voted for a 4.5% cut in rates as he can manage satisfactorially without making purchases in the UK.

Ahhhhhhh you must mean this guy.

"One normally mild-tongued investment bank economist last week described Blanchflower to me as an "idiot in search of his village".

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/15/ccliam15.xml&page=1

You can find some other interesting facts about him in Wikipedia

http://en.wikipedia.org/wiki/David_Blanchflower

"In 2003 Blanchflower filed for an "at fault" divorce from his wife Sian Blanchflower on the grounds that she was having an adulterous affair with another woman. Mrs. Blanchflower admitted to the affair, but argued that the affair did not constitute adultery under New Hampshire law. After a lower court initially sided with Mr. Blanchflower, the New Hampshire Supreme Court reversed the lower court's decision and ruled 3-2 in favor of Mrs. Blanchflower, concluding that adultery must involve sexual intercourse and that same-sex relations could not constitute sexual intercourse, based on the 1961 edition of Webster's Third New International Dictionary. Some gay-rights groups, who had filed amicus curiae briefs in favor of Mr. Blanchflower, condemned the ruling, which is seen as a setback to the same-sex marriage movement"

ManAtHome

Cheers Trev - had him flagged as rent-a-!!!!!!, but hadn't done any research - very funny and explains a lot...

Bit !!!!ed off with the press giving him the "Danny" tag now - not a Spurs fan (or any dahn sarf team fan), but the real Danny was more than a bit talented.

Generali

ManAtHome wrote: »

Bit !!!!ed off with the press giving him the "Danny" tag now - not a Spurs fan (or any dahn sarf team fan), but the real Danny was more than a bit talented.

If the Sunday Telegraph is to be believed, he insists on people calling him Danny. He also commutes over from the States.

The Markets seem to have priced in a rise of 25bps in May, another 25 by the end of the summer and a 50/50 chance of a 3rd by year end. The 25bps in May was mostly priced in to futures/swaps etc. already.

epz_2

with inflation getting way out of control am i the only one suspicuous that the only reason we waited till the local/regional electons were over before the next interest rate rise.

mildly ot but how are the boe going to control inflation when all the baby boomers start retring, a whole lot of top level jobs becoming available coupled with retirement lump sums hitting the economy should make for interesting times lol.

Generali

epz wrote: »

mildly ot but how are the boe going to control inflation when all the baby boomers start retring, a whole lot of top level jobs becoming available coupled with retirement lump sums hitting the economy should make for interesting times lol.

Quite the reverse IMO. You are refering to Generali's long-term house price bear market theory (GLTHPBMT).

GLTHPBMT is simple really. There are a lot of people, especially in the South East of England, that will be retiring in about 20 years time that will not have a pot to wee in (because their pension's been shafted by the politicians). On the other hand they will be sitting in houses 'worth' hundreds of thousands of pounds. How many people will really want to live in a decaying house worth £500k that they can't afford to heat? Better to sell up and move up north or to a cheap bit of Europe.

At this point many will learn the truth of 2 City phrases:

1. Cash is truth, everything else is speculation (i.e. until you actually sell an asset and have fivers in your hand you can't say what it is worth, you're just guessing)

2. Nobody ever went broke taking a proft.

House prices then start on a long-term downward trend, exascerbated by the fact that lots of people that were hoping to do on of those long-term equity withdrawal schemes for old people find they can't as the financial institutions won't lend for an indeterminate length of time against an asset falling in value!

We'll be getting shafted by the taxman on one side (gotta pay for all those nice foreign nurses that have come over to look after our parents because we can't be bothered somehow) and GLTHPBMT on the other.

GLTHPBMT is deflationary as it reduces asset prices, thus the ability to borrow money secured and thus the ability of the banks to increase the money supply.