Interest rates.

talexuser

After giving the "forward guidance" that rates could rise once unemployment got below 7%, as soon as there is a good chance this might happen the story now changes with Carney saying "It now seems likely that the rate of unemployment consistent with stable inflation in the medium term is somewhat lower than the MPC assessed back in August."

Larry Summers in the States has opined "real interest rates - interest rates minus the inflation rate - may have to remain negative for many years."

Do we need any more proof that rates are not going to rise in any meaningful way before the election, or perhaps even afterwards otherwise the whole house of cards would come tumbling down?

Glen_Clark

I guess Carnage didn't know the unemployment statistics are about as reliable as the inflation statistics.
For example those on a zero hours contract, getting maybe 12 hours a week, are not counted as unemployed. Those losing their benefits are not counted as unemployed.
Other indicators, like consumers moving from Tesco and Morrisons to Aldi and Lidl, probably give a more reliable indication of the state of the economy.:(

ColdIron

I guess that Carney is following in Mervyn King's footsteps by showing his complete inability to forecast anything, we should be greatful for the continuity

Glen_Clark

Carnage owes Osborne a favour for getting him an £850k job with £3k a week housing allowance. So I think its pretty clear he won't pull the plug on Help To Bubble - although he tries to appear impartial on that.

atush

I think the economy improved quicker than he thought, and he thinks it will be too soon to raise rates as that could stop growth. More jobs need to be created, so as to help wages rise. Because even with the drop in unemployment, wages are still sluggish.




But unlike others here, I don't see a conspiracy round every corner.

Minrich

Has the economy actually improved ?
We are told it has and the stats say it has , but can we believe this ?

newbie1980

interest rates are a farce as banks set what they want anyhow

its only a very few who have got the low rates

im with skipton bs and they had in the very small t and cs that there variable rate will be no more than 3% above boebr unless there is exceptional circumstances but they invoked the very unknown clause to allow them to put that rate up to 4.95% and now enen 5.45% for some
my one tracker part was 1.49% above boebr and the other 1.79% above boebr which are both 3% now and the last 3% above boebr but now 4.95% due to their exceptional circumstances clause

talexuser

But what growth? there is no evidence of manufacturing revival to speak of, no "rebalancing of the economy", trying to get to grips with the deficit, but no dent in the debt, in fact the opposite. I think the assumption that we will be back to normal soon is way off. We will have to get used this savings rate scenario for years to come I think?

jimjames

Minrich wrote: »

Has the economy actually improved ?
We are told it has and the stats say it has , but can we believe this ?

I believe it has. I think we could get 4% growth this year and the drop in unemployment is just one sign of it.

I said elsewhere that the use of interest rates to control economy has been described as using elastic to pull a brick. Add QE into that mix and I think it has the potential for growth/economy to burst back into life incredibly quickly confounding all the pundits. The fact that something was expected to happen 2 years into the future and has already been close to met within a few months is a sign of that.

While it is true from the figures that wage growth vs cost of living has been tough or non existent there is also the mortgage rate drop for those in work who have had mortgages for over 5 years.

The drop in mortgage payments has been around £400 per month which would equate to a pay rise of 20% to have the same effect. So although things have been tough, for some they have actually been pretty good.

Glen_Clark

talexuser wrote: »

But what growth?

The difference between the official rate of inflation, and the real rate of inflation, is what they call 'growth'.

Wilkins

Glen_Clark wrote: »

The difference between the official rate of inflation, and the real rate of inflation, is what they call 'growth'.

Ha, ha, A nice line and one I shall try to remember, but not really true because:

- there is no "real" rate of inflation in the sense of being universally valid. Everyone has their own rate and, as the ONS points out, inflation does not necessarily reflect the "cost of living", whatever that means.

- growth (GDP increase) is another statistical construct that means only what it actually measures, i.e. the end result of a piece of arithmetic performed on diverse data. It's relation to the "real" economy is somewhat elastic.

It's largely the media and politicians, not economists, who overinterpret these measures.