MPC gives forward guidance

N1AK

ILW wrote: »

Savings are invested in the economy though. Banks don't just stick it in a vault and forget about it.

Yes, although not as effectively. When I save a £1 in a bank the bank has to keep some of it in reserves, it has to be able to guarantee a return of the original sum plus interest etc.

N1AK

wotsthat wrote:

What he'd missed of course was that if it was such a guaranteed doddle he could take his savings and buy bank shares - the presenter didn't offer this solution.

If only he had; it'd be awesome, bet you'd be virtually able to here the callers brain grinding its gears on air!

Generali

ILW wrote: »

Wonder what would happen if inflation hit say 10% but unemployment stayed over 7%? Would he let inflation go to any level at all, mid 70s style?

Probably not but for the current policies to work, that is what we are required to believe.

If you Google something along the lines of 'inflation expectations and monetary policy" then you'll get the idea that is being persued.

N1AK

Wild_Rover wrote: »

I agree with much of what you say, but at a basic level eg buying already issued shares might put cash (fees) into the pockets of the brokers, but it puts no more cash onto the companies whose shares are bought. We are increasingly transferring "investors" risk out of the banks where folk feel their money is secure, to the stock market where investors perceive there to be more risk. For most "little people", saving means bank/building society savings and ISAs which are giving very poor returns. Folk who are 16-25, for example, have had no incentive to start saving and it is a lot easier to continue an existing habit than start a new one.

For folk like me and Mrs Wild_Rover, who have no mortgage or other debt, and a monthly pension income which is more than enough to cover all "needs" and even some wants, investing in shares etc is not too risky; many others cannot afford the "risk" and see the purchasing power of their savings eroded.

WR

All good points. Although generally the 'little people' will typically be benefiting from interest rates by having lower mortgage payments. Low interest rates also puts less upward pressure on rents.

The inability to take risk is always a downside when it comes to money. The difference at the moment is that instead of those investing making money faster than savers it's that savers are losing money faster.

sheffield_lad

Well I could do with fixing also but with this statement I am going to hold off for as long as possible the thinking being if I fix now say 5yrs in 2-3yrs if rates change I only have 2-3yrs left before I have to buy a more expensive fix.

If I wait and wait, when I see inflation pressures building and or housing bubble etc I can fix just before rates rise and enjoy a full 5yrs with a fix so an 8yr fix from today.

thor

Screwing savers over is the impression I got from Carney. He was asked directly(I think on Sky News) about low saving rates and he basically said that savers would understand losing out as it is for the benefit of everyone else. The way I see it - there are a hell of a lot of people with pre-crisis mortgages who are paying far less since 2008 at the expense of savers who are getting a pittance in interest. It is a direct transfer of wealth.

nicko33

thor wrote: »

It is a direct transfer of wealth.

You mean that the transfer of wealth from borrower to saver is continuing, but at lower levels than before? ok.

wotsthat

sheffield_lad wrote: »

Well I could do with fixing also but with this statement I am going to hold off for as long as possible the thinking being if I fix now say 5yrs in 2-3yrs if rates change I only have 2-3yrs left before I have to buy a more expensive fix.

If I wait and wait, when I see inflation pressures building and or housing bubble etc I can fix just before rates rise and enjoy a full 5yrs with a fix so an 8yr fix from today.

You can get a 5 year fix now for % - base rate being 0.5% in 2 years is no guarantee that 5 years fixes will still be %.

5 year fixes are based on lender forecasts over that period. You could sit and wait until you see inflation pressures building but the lenders will be doing the same thing. If they seem the same inflation pressures as you then 5 year fixes will be getting more expensive.

RobertLamb61

it's not really a promise of low interest rates is it, more a statement of intent to keep people with mortgages from worrying about the future!