Inflation shock leaves markets fearing three interest rate rises this year

m00m00

pickles, the token hpi cheerleader left

richdeniro

Kez100 wrote: »

Does anyone believe the inflation we are experiencing can be controlled with interest rates anyway?

Food and fuel are global problems. We could buy less, I suppose, but they are both essentials to a certain extent.

Also, if interest rates rise, won't the impact on mortgage costs push inflation up and become a self fufilling prophecy?

Or do I just not have a clue???????????? (This is a valid option. I won't be offended!)

I think that when interest rates rise the pound becomes stronger and so it becomes cheaper to import goods from abroad.

As UK plc imports practically everything then this should do something to control inflation.

Personally I think the BoE should just be done with it and raise the rates 2-3%, have a recession and clear out all the bad/dodgy debt.

tradetime

Kez100 wrote: »

Does anyone believe the inflation we are experiencing can be controlled with interest rates anyway?

Some economic analysts are querying this, I don't know.

Kez100 wrote: »

Also, if interest rates rise, won't the impact on mortgage costs push inflation up and become a self fufilling prophecy?

Yes and no. Yes, raising interest rates will of course push up mortgage costs and the consumer would feel it just like any other price inflation but the CPI which the government uses to measure inflation does not include mortgage payments so it has no effect on their inflation figures. Mortgages were excluded because the very tactic to fight inflation would drive them up and thus fuel inflation if they were included.

ManAtHome

Yup - interest rates at 20% would probably cause CPI to drop - stronger pound making all the stuff we import cheaper (at the expense of the 10% or so we export). Doesn't take that much (sadly un-) "common" to twig that most things have been shooting up since el banko d'troosers started dropping rates last December...

epz_2

well bank rates are currently 6.27% and rising for good buyers, why not whack the BOE up 1% and instead of banks making profits on the 1.27% we can have cheaper petrol and food.

ManAtHome

Coz troosers, badger, and bird seem to think that mortgage rates are tied to el banko d'troosers rates - try a google about "shock horror, why aren't banks dropping rates in line with eBkoTroozers".

Made that up - but they were giving it the shock/horror stuff a month or so back.

WTF?_2

epz wrote: »

well bank rates are currently 6.27% and rising for good buyers, why not whack the BOE up 1% and instead of banks making profits on the 1.27% we can have cheaper petrol and food.

I think that the media and public are slowly beginning to grasp the fact that low central bank interest rates are not, in fact, the universal answer to every economic ill.

What is really interesting is what happens to inflation in the US. They have slashed their rates and given out money to banks like there was no tomorrow, much more so than the UK. Yes, because of the dollar's privileged position they have been able to 'export' some of that inflation onto the rest of the world (which we are feeling the effects of) but they should be in line for a massive dose of price inflation at home.

Bernanke has been making noises about a 'strong dollar' recently (after being very visibly pro money-dropping-from-helicopters in the last six months) so I'd guess there's some very bad news on inflation sluicing down the soil pipe and about to dump on them.....

Ultimately though, no-one believes that the Fed will 'keep the dollar strong'. Their policy over the last decades has been to debase it to maintain their standards of living which are simply unsustainable in the face of their balance of trade situation.

tradetime

Inflation figures out this week should make for interesting reading, hope Mervyn's got his Alka Seltzer handy.

Tue Jun 17 9:30am
............................Forecast.........Previous
CPI y/y....................3.2%..............3.0%
Core CPI y/y.............1.5%..............1.4%
RPI y/y....................4.2%..............4.2%

La_Contessa

just out of interest, I just checked Nationwide's website and an article they have put together, and they insist that the interest rate will fall again, as the Bank of E. is under pressure due to the pressure on consumers. Also is there a general election due next year or year after, lets see Government tactics then..............they also say that consumers are in a much stronger position than they were in the early 90's regarding property, and that we are very capable of weathering this property storm, such as it is, and though house prices are or have fallen, A: it is only in certain areas (which was apparently backed up by Kirsty (of Kirsty & Phil on a morning show)) and and B: it has not been a significant drop to cause any real concern. Most will not be affected, in their words, by this drop, and shall remain unconcernd, unless under pressure to move or have borrowed to the hilt placing themselves in a difficult position and unable to keep on paying...... Not quite what we are hearing everytime we switch on the news... I thought that was quite interesting....:o

meanmachine_2

La_Contessa wrote: »

just out of interest, I just checked Nationwide's website and an article they have put together, and they insist that the interest rate will fall again, as the Bank of E. is under pressure due to the pressure on consumers. Also is there a general election due next year or year after, lets see Government tactics then..............they also say that consumers are in a much stronger position than they were in the early 90's regarding property, and that we are very capable of weathering this property storm, such as it is, and though house prices are or have fallen, A: it is only in certain areas (which was apparently backed up by Kirsty (of Kirsty & Phil on a morning show)) and and B: it has not been a significant drop to cause any real concern. Most will not be affected, in their words, by this drop, and shall remain unconcernd, unless under pressure to move or have borrowed to the hilt placing themselves in a difficult position and unable to keep on paying...... Not quite what we are hearing everytime we switch on the news... I thought that was quite interesting....:o

Do you actually have an original thought in your head, or do you only believe what estate agents tell you?

12 months ago the Nationwide insisted 2008 would see zero property inflation.

6 months ago they predicted falls of under 5%

Last month they were predicting falls of around 7/8% this year alone.

Next month, who knows what they'll say.

You do understand that banks and estate agents always talk up the market, no matter what, don't you, or are you just being trollishly naive?!!