Bank considered half-point rate hike

padders_2

u will find that im rarely wrong

"Mortgage Payments Hike Up Inflation
Money – The Office For National Statistics (ONS) said the Retail Prices Index (RPI), which includes mortgage payments, jumped to 4.6% in February from 4.2% the previous month. That was its highest level since August 1991 and will fuel concerns that interest rates may rise again next month"
http://money.netscape.com/story/2007...-up-inflation/

You are right that RPI does include mortgage payments, but it is CPI that is the target the BOE have to set; also you will find it is RPI-X which is often reported as an inflation figure, which does exclude mortgage payments:
http://www.statistics.gov.uk/downloads/theme_economy/RPIX.pdf

Interest rates do not fuel inflation, money supply fuels inflation. IR may affect or be included in calculations that attempt to reflect inflation but it does not increase inflation.

That is like saying shooting a gun does not cause someone to die because the bullet flying through them is what kills them. Interest rates directly affect money supply so they affect inflation through that. Also interest rates have other affects on inflation independant on money supply - only extreme monetarists believe inflation is only about the money supply.

cloud_dog

padders wrote: »

That is like saying shooting a gun does not cause someone to die because the bullet flying through them is what kills them. Interest rates directly affect money supply so they affect inflation through that. Also interest rates have other affects on inflation independant on money supply - only extreme monetarists believe inflation is only about the money supply.

I was about to reply that we sort of agree except...........I have to comment on the gun analogy. I accept that IR affect the supply of money but IR are not the be all and end all in money supply.

Re the gun, you could take it a step further and say that if there wasn't any demand then inflation would not occur, i.e. no person to pull the trigger, the bullet doesn't get fired, someone doesn't get killed.

This is probably one of those occasions where we will just have to agree to disagree.