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

Woby_Tide

the 4 againsts included Mervyn King and his two deputies too, so obviously they arefinding it hard to be heard.

I've been trying to find a link from a newspaper story over the weekend in The Times on Sunday I think, it was some analysis on teh situationa nd referenced a think tank/survey done recently on a cross section of economists views. The general consensus had been a further rate cut in November/December followed by pretty much nothing next year(I'm guessing the survey had been done before the latest cut and inflation figures released), one analyst though(Lehmans I think) had gone as far as suggesting rates would be 3.25% by end of next year. Can't find the link now and chucked the paper out this morning thinking I'd be able to get the link from the Times website but alas not(I'm positive it was in the Economic Outlook column where he talks about Oil but they seem to have cribbed the paper article, sure the 'think tank' group was www.idea.... somebody or other but can't remember the rest

meanmachine_2

Well four of those in favour of the cut are Brown-nosers, quite literally, so it looks like the government's been leaning on this "independent" body.

Ridiculous.

Whenever politicians get involved there's always trouble. Brown needs the economy to look like it's OK when he takes over the reins. There's probably very little chance of Merv getting his own way from this point on.

FaTB

I'll take a guess that IR's will stay at current rate until the end of the year, regardless of what happens to inflation.

This will be partly as a face saving exercise, and partly to try and maintain what consumer spending there is left.

They don't want to look to reactionary, especially as they are meant to plan a year or two ahead.

I think after that rates will have to start rising again, and the longer they leave it the more aggressive those rises will have to be.

But what do I know ??

nelly_2

FaTB wrote:

They don't want to look to reactionary, especially as they are meant to plan a year or two ahead.

QUOTE]

They are supposed to plan stuff I'd have thought, however they were chasing house prices with interest rates, rather than 2 years a go setting ithigher to curb it in the 1st place, same goes for credit cards/loans etc etc.

I cant see them being to slow so they did it on purpose, in the interest of manufacturing... allegedly, not that we have any

meanmachine_2

It's a very bizarre system.

The MPC isn't meant to give a damn about the here and now, so all of these bleating retailers calling for a cut should have been ignored.

Because of inflationary lag, they're working on a 2 year time frame, and yet are being asked to make cuts because of the situation today.

Basically, they did too little too late over the past 3 years and are now playing catch up.

And because int rates *should* have hit 5.5% when there was the opportunity to raise them, now all the MPC can do is shrug their shoulders and fudge it.

I agree, they'll do naff all for the next six months, and then in the new year have to start raising again, because by then US rates will be above 4%.

deemy2004

Oil rising from $40 to $65 this year is the main reason for the take off in inflation.

They are perhaps hoping that it will come down in the coming months. But if it does not then that would make a rate rise more likely once the CPI starts breaking about 2.5%

Corley

i cant see oil prices going down now, prices only seem to go one way, UP!!!

deemy2004

The last time they were saying oil can't go down, it went from a high of $40 to $10.

I think we will see lower prices again at sometime, maybe not under $30, but probably under $40.

Lots of reasons why it would fall.

Though obviously in the long, long run, higher prices are enevitable.

FaTB

Corley wrote:

i cant see oil prices going down now, prices only seem to go one way, UP!!!

That depends on whether the recent rises are just a bit of profiteering, or if we really have hit "peak oil"

Only time will tell, but I do think that the general trend will be upwards now as oil reserves diminish and, more environmental taxes come into force.

meanmachine_2

Surely it's not profiteering but merely demand.

Last time I checked the US weren't exactly cutting their consumption. And now we have China burning it up big stylie, how is supply going to go up to meet demand and choke off prices?

If you were an oil baron would you be arguing that your prices should be going up, or down?