MPC may raise Interest Rates to 6% in August!

free4440273

Nice to see they have managed existing good quality control though - i'm thinking of the Lenevo (formerly IBM) brand in particular

Generali

free4440273 wrote: »

Nice to see they have managed existing good quality control though - i'm thinking of the Lenevo (formerly IBM) brand in particular

<pedantry>Whilst the Chinese Govt is the biggest single investor in Levono, it wasn't the sovereign investment fund that bought the stock in IBM, it was a part nationally owned company.</pedantry>

Melissa177

After yesterday's market crash, I defo think they're going to hold now.

Generali

Melissa177 wrote: »

After yesterday's market crash, I defo think they're going to hold now.

I agree with you there.

If the credit markets keep going as they are, it's not going to make a huge difference what the MPC do. It doesn't matter what the interest rate is if nobody will lend to you!

free4440273

free4440273 wrote: »

...call for desperate measures (e.g. inflation).
i would say no rise in august but almost certainly one in september. this might sound superficial but raising in october/november might kill any xmas joy (that which is out there) amongst joe public. that being the case, a .50 increase in september is not out of the question. that would (being selfish for a moment) be good for me as my three-year bond expires in october and i am still looking for the best possible rate (at the moment, that looks like leeds BS at 6.70 gross)
question is 5.75 plus .50 equals 6.25 ~ the straw that breaks the camel's back?

...inflation is STILL a problem however (and a massive problem) - they can't disguise that: a .50 increase in september would be the last increase for a very long time. see my previous post above as to why. i know it sounds mad, and unlikely but still a possibility when you consider inflation is out of control. as i say, a .50 increase would be the last (and also the final nail in the coffin). BofE credibility restored and inflation knocked on the head (or at least wounded), and house price decreases (not increases) ensue.

kingkano

free4440273 wrote: »

...inflation is STILL a problem however (and a massive problem) - they can't disguise that: a .50 increase in september would be the last increase for a very long time. see my previous post above as to why. i know it sounds mad, and unlikely but still a possibility when you consider inflation is out of control. as i say, a .50 increase would be the last (and also the final nail in the coffin). BofE credibility restored and inflation knocked on the head (or at least wounded), and house price decreases (not increases) ensue.

And a recession. Dont you think the FTSE and the other markets is a warning enough of that?? I think another .5 increase will push us straight into recession. Can't see it happening. It's a HOLD for me at this time. They'll wait a few months to see if everything keeps biting in as it should, and maybe keep a Oct/Nov rise up their sleeves if it isnt (at the moment I think it is biting home though).

Snow_Dog

Given the length of time it takes for rate rises to filter through the system I can see them hanging on, the current crop of reports are indicating that the housing market is coming off the boil a tad (though thats just as likely to be the time of year), consumer credit on CCs is falling I believe (and as been for some while), mortgage approvals showing large dropoffs.

The thing is with IRs is its quite a blunt tool and the feedback is akin to piloting a boat, if you pitch the wheel right over, unlike a car it takes a little while for a direction reaction, but when it does happen you cannot immediately reverse it.

What amuses most is the simplistic view many people have especially certain bears on HPC GHPC etc who take a single sound byte and amplify it into global armageddon unless the MPC raise the rates by 50 points next time round.

Hold this time if I had to place a bet.

ManAtHome

Yes, but as Free said earlier El BankO's job is to keep CPI around 2%, not to regulate house prices or consumer credit. Any reduction in spending caused by wallets being tightened will not necessarily have a downward effect on inflation.

Generali

ManAtHome wrote: »

Yes, but as Free said earlier El BankO's job is to keep CPI around 2%, not to regulate house prices or consumer credit. Any reduction in spending caused by wallets being tightened will not necessarily have a downward effect on inflation.

This is not the whole story though. They have an inflation target of 2% but it's only a target:

...it would not be possible to keep inflation at 2% in each and every month. Instead, the MPC’s aim is to set interest rates so that inflation can be brought back to target within a reasonable time period without creating undue instability in the economy.

My feeling is that they'll let inflation rise rather than cause a recession. Politically, inflation is easier than recession despite inflation being far more painful in the end and it has the bonus of reducing the real value of the massive liabilities the British govt has for pensions.

ManAtHome

But if they let inflation rip, it will have a detrimental effect on inflation-linked government pensions, and other forms of benefits - aren't most of them linked to RPI?

Must admit, it wouldn't totally surprise me if they abandoned any sort of targeting "for a while" (eg until after the next election), but if targets are that arbitrary why are we paying out for the MPC monthly meetings..?