Inflation jumps, what will IR's do next month ?

FaTB

Inflation made a significant jump today, even by Gordon Brown's preferred measure.

What effect will this have on interest rates in the last half of '05 or early '06 ?

Surely the downward trend will stop here !

Ian_W

Your first name wouldn't be HUGH by any chance, would it? :rotfl: Sorry I digress.

One reduction in 2 years or so hardly qualifies in my book as a TREND!

Wouldn't think one months figures will have em quaking in their boots and after the BoE meeting EG was giving interviews saying it wasn't the signal for further interest rate cuts - he probably had an idea it was on the cards.

As a result of what he said swap rates - used for longer term fixed mortgages - have already gone up a tad.

Too many unknowns and too soon to say IMO.

[Deleted User]

FaTB wrote:

Inflation made a significant jump today, even by Gordon Brown's preferred measure.

Mr Brown will probably change his preferred measure!

[Deleted User]

Ian_W wrote:

Your first name wouldn't be HUGH by any chance, would it?

You may be thinking of another poster on these boards, Mr Jarse.

FaTB

Deleted_User wrote:

Mr Brown will probably change his preferred measure!

Exactly !!

Will probably start using house prices in the measure soon, as it will have a deflationary influence.

deemy2004

The Interest rate cuts are correcting an up trend.

A lot depends on the economy, IF it does start looking likes its going into a recession then interest rates will likely be cut ! BUT the effect of a recession will be to drive house prices lower anyway !

On the otherhand if the economy continues at the current below trend and inflation continues to rise to beyond 2.5% CPI then highly likely interest rates will be raised back upto 4.75% if not higher.

I personally think the latter will happen, but either scenerio would mean falling house prices.

2006 is increasingly looking likes its going to be a tough year for Britian, where the BOE and the government will have its work cut out to keep the economy balanced i.e. growth and low inflation. It seems like the luck we have enjoyed for the last 7 years or so, has run out.

meanmachine_2

I love how the government takes credit for the "stability" of the last 8 years, and yet when things start to unravel, it's the fault of "global pressures".

Yeah yeah.

The fact is, we were lucky for a few years, thanks to China keeping everything cheap as chips, and oil at peak. Neither of those things are true anymore.

I'm no expert but I can *feel* that the goods I buy are becoming more expensive and I can *feel* in my pocket that wages aren't keeping up.

So am I going to rush out to buy an over inflated property when I *fear* that a correction might be on the cards? No I'm not. I'll hunker down and save like crazy.

Retailers and estate agents can whistle for all I care.

meanmachine_2

Wow, MPC were split 5 to 4 on a rate cut. Didn't expect that.

Think that rules out any further cuts. My grannies can rest easy.

And even those who did support a cut only did so by arguing that it could be "reversed later". Well duh. What's the point of doing that?

You'd damage the economy more of you did that.

Chumps.

I think us lot on here should be in charge. The minutes would be a lot more entertaining anyway.

EDIT: By the way, as far as I understand it, the MPC only have one vote per session. So last month it was a 5:4 vote to CUT interest rates. None of them were given the option of raising rates. I wonder if, next month they;ll go back to voting on whether to RAISE rates. It's possible I guess.

deemy2004

From what I understand, they can individually choose any of the three options at any meeting, i.e. to raise, keep the same or cut.

Woby_Tide

i.e. the vote this month was 5:4:0
last month was 4:5:0
June 2:7:0
May 0:8:1
April 0:7:2
Mar 0:7:2
Feb 0:8:1
Jan 0:9:0


(Though in general I guess it's unlikely to ever have 1 person in each camp which would be a true 3 way vote so generally the vote is whether to maintain rates as they are or cut/increase as per those opposed to a maintain

meanmachine_2

That's interesting Woby, so up until May at least one person was voting for a rate rise.

What's happened since then? Oh yes, inflation's taken off.

The MPC is a joke.

They argue that inflation will be down in a year 18 month's time, but then argue that the economy will be stronger. So which is it?

I think they're in a right muddle, to be honest.