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

SuperV

One analogy – if you are at the peak of a mountain, you breathe less air?
Oil price is air, interest rate is the amount of air you breathe – the bigger interest rate, the less air you get. If you don’t have enough oxygen, you fall down very fast!
If the economy struggles, pound will drop even faster. Higher interest rate will archive exactly that. Who wants to invest in pound when everything is going down??? They will invest in Eurozone, pound will continue its free fall, and inflation will go up as mentioned.
Once again, BoE basic interest rate can affect only internal inflation drivers, not external.
Proposed “correction” is another Wall-street myth – it helps only speculators (read banks and hedge funds). If t is correct, US and UK economies would be very strong right now, right? What is true is that financial sector (speculators) is a huge part of both economies, much more than in any other.
Who pays the bill always?
From the history point of view, it took Britain few years, three to five to recover from the crash in nineties. And the price of oil was not a factor.
With a high price of oil (there to stay), it will take Britain much longer to recover. Probably will end like Japan. If not worse.
p.s.
Eurozone and American interest rates are 4% and less...

SuperV

Plus New Zealand economy blooms with high interest rate, right?

dunstonh

Can only repeat was has already been said.

Interest rates are not high. They are around the typical long term average. They are at that level for a good reason and really ought to be a little higher.

TighterThanTwoCoatsOfPain

SuperV wrote: »

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!

Oooook! You obviously know your stuff ! Cut the BoE rate....... :rotfl:

SuperV

Some critical thinking ladies & gentlemen, please!
What I have heard till now are only repeated mass media mantras. Repeat them enough times and they will become truth, right?
An interruption caused by a stone thrown by a boy in Nigeria caused a hike of US$5 yesterday... that is right as all media reports this news with a nice explanation easy to swallow. Right?
BoE interest rate is too high. If you compare rates among developed and developing countries, Britain is somewhere in between. Does it mean that Britain is not developed enough? Or that interest rate is too high?

beecher

SuperV wrote: »

BoE interest rate is too high. If you compare rates among developed and developing countries, Britain is somewhere in between. Does it mean that Britain is not developed enough? Or that interest rate is too high?

I seriously think you should read up on some basic Economics. You can't determine how developed a country is from its interest rates - that's just simplistic in the extreme. The BoE rates are not high and you've still to explain what exactly you think cutting rates would achieve.

AMILLIONDOLLARS

beecher wrote: »

I seriously think you should read up on some basic Economics. You can't determine how developed a country is from its interest rates - that's just simplistic in the extreme. The BoE rates are not high and you've still to explain what exactly you think cutting rates would achieve.

He doesn't know:rotfl: :rotfl: , come back when it's hitting 15% I lived through that period as well, Leave well alone, the minutes it goes down the mad property rush would begin again, we need the rate to hold steady where it is and to tighten our belts, even if that means using the buses. I reckon this coming recession is going to do more for the planet than Ken Livingston ever tried to do, we are already cutting down on using our utilities, driving our cars less because of the cost of petrol, we're even shopping more wisely because of food prices, let's hope we are learning the lessons for when times are good once more.

AMD

SuperV

I did that already few times...

BoE interest rate controls inflation, yes? Inflation depends on internal and external drivers like the price of oil. Price of oil is something that is a fact. BoE interest rate can affect only internal inflation drivers so inflation should be calculated using only internal drivers of inflation and excluding external like the price of oil.
Readjustment is a rate cut. OK?
If the rate is not cut, there is a big probability that there will be a crash, few winners and a lot of losers. Like in nineties, but will last longer because of the price of oil. I see that a lot of you prefer that solution... well, if you don’t have a job, you will either loose a house or you will not be able to buy one. And it will last longer than in nineties.

If there is a rate cut there is a probability that the bust will be avoided. Slightly higher inflation due to the price of oil and gas will eat overvaluation of the housing market.
p.s.
No, you can't determine how developed one country is. But it is interesting that from all developed countries the UK has the highest interest rate, isn't it? And the economy isn’t blooming.
p.p.s.
Sorry to disappoint you...

sdooley

The interest rate does control the price (in the UK) of oil. If the interest rate were cut now to EU, worse still US or Japanese levels, the pound would go into freefall. As the oil price is denominated in dollars, our cost of oil (and all other commodities) would soar.

Ian_Griffiths_Halifax

Simple solution. Invade all countries who produce oil and keep it for our selves or sell to other countries at a profit.

Damn. Somebody beat us to it.