Carney: We could set interest rates at 0% and start QE again

Graham_Devon

Carney seems to have changed his tune somewhat! A bit more forward guidance I guess.

If we were in a position where the economy needed additional stimulus ... we could cut interest rates towards zero. We could engage in additional asset purchases, including a variety of assets. We could also provide a perspective where we could adjust our policy horizon - in other words we could shorten our policy horizon over which we wanted to return inflation to target.

He also stated that the bank has absolutely no intention and no interest in negative interest rates.

But hey, theres always next week.

http://www.bbc.co.uk/news/live/business-35611548

mwpt

House prices to the moon!

Graham_Devon

Can't see as it will make that much difference to be honest. A fall of 0.5% isn't going to change the world.

The QE though could be interesting. Seems every man and his dog, bar the US (currently) is attempting the same thing.

caronoel

I was planning to take out a 5 year fix later this year, looks like they could be a whole lot cheaper by then.

glentoran99

Give us all 10 grand each, that would soon stimulate the economy

redux

Some people might be reading too much in the ambiguity that Carney comes up with.

A while ago he said we are approaching the time when interest rates will rise. This is of course patently true, but really it doesn't actually mean anything; we can distil it down until all it says is the calendar progresses forward. I pointed out back then that we are also approaching the next time that interest rates will fall at exactly the same speed.

mwpt

Graham_Devon wrote: »

Can't see as it will make that much difference to be honest. A fall of 0.5% isn't going to change the world.

The QE though could be interesting. Seems every man and his dog, bar the US (currently) is attempting the same thing.

Yup it does. On a 25 year term at current 2% interest rates, a drop to 1.5% interest rate equates to about a 6% rise in the amount you can borrow. Ie. about a 6% rise in the asset price.

On a 30 year term, which is what we seem to be moving to now (the new normal), the effect is even greater, about a 7% rise in the amount you can borrow.

On that note, at 2% rates, the asset price on a 30 year term vs a 25 year term could be about 15% higher.

If you want to know why house prices are so high, look at cheap credit and longer terms.

Thrugelmir

mwpt wrote: »

Yup it does. On a 25 year term at current 2% interest rates, a drop to 1.5% interest rate equates to about a 6% rise in the amount you can borrow. Ie. about a 6% rise in the asset price.

Lenders margins aren't going to fall a further 0.5%. Once the FLS falls away from having an impact. Then there may well be fewer cheap deals on offer.

N1AK

glentoran99 wrote: »

Give us all 10 grand each, that would soon stimulate the economy

Give us all the option of a VAT rebate at least that way you can't just save it instead.

padington

Thrugelmir wrote: »

Lenders margins aren't going to fall a further 0.5%. Once the FLS falls away from having an impact. Then there may well be fewer cheap deals on offer.

.... But help to buy 3 could buy a whole lot of the right assets if secretly you were planning years of low interest rates....

Thrugelmir

padington wrote: »

.... But help to buy 3 could buy a whole lot of the right assets if secretly you were planning years of low interest rates....

Interest rates may well remain low. Doesn't mean that taking on debt is a good idea.