No Interest Rate rise until 2016 due to poor Wage Growth

adr0ck

Blanchflower in the independent:

http://www.independent.co.uk/news/business/comment/david-blanchflower-the-bank-now-admits-pay-growth-is-going-to-be-poor-they-should-have-listened-to-me-9674795.html

The MPC has made clear that, based on falling wage pressure, that the chances of a rate rise in 2014 have totally disintegrated and may not even happen in 2015, especially if the US Federal Reserve fails to raise rates. The eurozone is slowing again and six European countries including Switzerland, Portugal and Greece are experiencing deflation with the eurozone inflation rate at only 0.4 per cent.

shortchanged_2

So basically the UK economy is still in the do do.

CLAPTON

all as expected and all roughly as explained in first year economic text books.


interest rates rise when wage pressures start to increase general price levels.


of course other things can upset things

Graham_Devon

Oh, suddenly they care about wages!

Cute!

Graham_Devon

Juist seen that Mark Carney is saying the opposite.

He states they have to have the confidence that real wages are going to be growing sustainably in order to increase interest rates. That does not however mean they have to wait for that fact to turn to do so.

In other words, 2 messages, he's getting good is carney. 2 messages which basically states they may put rates up, one day. Maybe.

The markets seem to be saying "please dear, do stop flip flopping and just shutup".

A period of silence on your part would be welcome. That was Clement Attlee's put down to Harold Laski when the post-war premier thought the chairman of the Labour party was speaking out of turn in 1946. Increasingly, the financial markets would like someone to repeat that message to Mark Carney.

The latest in a series of seemingly conflicting statements emerged from the governor of the Bank of England in an interview with the Sunday Times. Just days after delivering what the City took to be a "doveish" quarterly Inflation Report, Carney told the paper that the Bank might raise interest rates before growth in earnings caught up with inflation. That prompted speculation of an earlier rise in borrowing costs than the markets had been expecting and was enough to send the pound up on the foreign exchanges.

http://www.theguardian.com/business/economics-blog/2014/aug/18/mark-carney-bank-of-england-rate-rise-timing-uncertainty

Graham_Devon

And even an MPs are suggesting that the Tories and BOE are stiching us up.

A second MP has attacked Bank of England Governor Mark Carney, claiming the Canadian is "clearly" attempting to delay rate rises until after the next general election.

Treasury Select Committee member John Mann’s intervention comes in the wake of accusations from Conservative MP Mark Field of a “clear bargain” between Carney and Chancellor George Osborne to keep rates low until the country goes to the polls next May.


A dovish inflation report from the Bank last week meanwhile dampened prospects for an interest rate rise this year.


Mann said: “It is abundantly clear that Mark Carney is attempting to delay interest rate increases until after the election when they rise immediately.”

http://www.independent.co.uk/news/business/news/bank-of-englands-mark-carney-accused-of-delaying-rate-hike-ahead-of-general-election-9676248.html

Thrugelmir

Graham_Devon wrote: »

Juist seen that Mark Carney is saying the opposite.

Perhaps that's because the distribution of wage inflation isn't equal across the board. The MPC will be looking at a whole range of indicators with the ultimate aim of normalising interest rates. The longer they remain abnormal the more sharply they may need to rise. Carney one suspects prefers a gradual adjustment policy.

CLAPTON

Thrugelmir wrote: »

Perhaps that's because the distribution of wage inflation isn't equal across the board. The MPC will be looking at a whole range of indicators with the ultimate aim of normalising interest rates. The longer they remain abnormal the more sharply they may need to rise. Carney one suspects prefers a gradual adjustment policy.

how can it be that the longer they remain abnormal the more sharply they must rise?


if that were so, given the last few years, we would expect the rate to go from 0.5 to 5 % in an afternoon.
that's not going to happen.

Crashy_Time

CLAPTON wrote: »

how can it be that the longer they remain abnormal the more sharply they must rise?


if that were so, given the last few years, we would expect the rate to go from 0.5 to 5 % in an afternoon.
that's not going to happen.

HPC will happen anyway, rate rises are a sideshow.

wotsthat

24 hour news has a lot to answer for - it has to be filled with something - speculative white noise usually.

It wasn't that long ago that I didn't know (or care) that my mortgage was going up or down until I received a letter from the Halifax letting me know.

Thrugelmir

CLAPTON wrote: »

how can it be that the longer they remain abnormal the more sharply they must rise?

For the simple reason that the economy in the broadest sense is recovering. Growth forecasts look reasonably good at the current time. Cheap money is inflating asset prices creating another potential problem down the road.

There again the Eurozone could drag the UK down if it continues it's Japanese style recession.