Interest Rates - BoE should cut them or the governer should go!

SuperV

Interest Rates - BoE should cut them or the Governor should go!
At the moment interest rate of BoE is with no real reason high. Explanation that it is high in order to calm inflation is superficial one as the main reason for the higher inflation is external influence – price of oil! Basic rate of BoE can influence only internal drivers of inflation.
Very probably if the price of oil and its influence is taken out of inflation statistic, inflation would be around 1% or less.
By keeping high basic rate Governor just shows once again (after Northern Rock) that he doesn’t know what he is doing.
Solution – either the basic rate of BoE should be cut or the Governor should go before he does even more damage! An action is needed! Like the one with punitive bank overdraft charges!

ronaldmacdonald

Interest rates are NOT high at all. Mortgate rates are HIGH - but then again they appear to have become detached from BoE rates. That link needs realignment.

random_fat_bird

I'm more likely to believe in the financial knowledge of Mervin King than that of somebody on a forum who's angry. Sorry:)

dwsjarcmcd

I agree with random fat bird, what a strange 1st post!

_Andy_

SuperV wrote: »

An action is needed! Like the one with punitive bank overdraft charges!

Hardly comparable situations but what 'action' are you proposing?

MRSTITTLEMOUSE

Mortgage rates are higher than they were,but by no means high.I remember paying 15% not long after we bought our first house.Unfortunate,but it's a risk you take.It's just that because we have had such low rates for so long people who have never known any different are finding it a shock to see them slowly creeping up.I'd say they were midway.

beecher

Mortgage rates aren't even that high, historically speaking. If you've got to blame someone for this situation, blame Gordon Brown for encouraging people to borrow more than they could afford, and for upping public borrowing. Cutting base rates would make very little difference.

SuperV

NR showed the knowledge of Mr King.

Interest rates are used to control inflation (nothing else). There are internal and external drivers of inflation and BoE base rate will affect only internal drivers.

Action – BoE should use core British inflation excluding influence of external drivers like the price of oil. As the Government likes to tinker with core inflation, it will not be a problem to change its definition once again.
Public pressure will help them to make right decision as we noticed on more than one occasion.
p.s.

Angry? I don't have any reason )) but many should. Because it will not end only with the housing crash, job losses will follow. A lot.

beecher

Could you perhaps explain what you think cutting the BoE base rate would achieve?

drrobert

Interest rates will have to rise to control inflation - I believe that the next interest rate move will be up, now down.

Raising interest rates controls price inflation by two means - the first is by suppressing consumer demand (obviously this is less desirable now as we are entering a recession), and the second is by strengthening the currency. If the BoE raises interest rates, the pound will become stronger in the currency markets, and imports (such as oil, food, gas etc) will become relatively cheaper.

Conversely, if the BoE were to lower interest rates, this would lead to rises in the price of oil, food and gas (all of which Britain now imports).

The coming recession and house price crash cannot be avoided. House prices became crazily overvalued many years ago, and now need to return to a sensible level. Ideally, this crash should take place promptly so that Britain can retrench and rebuild its economy on a sounder footing for the future.

minimike2

1. The base rate is not high. It is actually quite LOW.

2. Inflation might be high because of Oil and food prices, but EVERYTHING has an overall effect on the economy, hence the delecate balancing act that is required in a time like this.

3. Now is not the time for cheap money. Whilst I would love the base rate to go down, as it would make my mortgage cheaper, it would be WRONG to gamble the stability of the economy on doing such a thing at the current time.


What exactly are your actual reasons for your rekoning that we should be seeing base rate cuts?