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

monkeymaster

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!

As long as you don't complain when you're paying 10 quid for a loaf of bread.

Gorgeous_George

Why can taxes not be raised to control inflation? After all, raising interest rates gives investors more money to spend on foreign goods -fuelling inflation.



GG

SuperV

Please read carefully - interest rate is for internal inflation drivers, not external like oil. Eurozone interest is 4% and pound is in the free fall already. Property market at the top is also in the free fall - first sign that there is no interest either from fat cats (no bonuses) or international investors.

Maybe this will be easier - everybody uses oil (bikes as well, shoes, computers, energy for wi-fi, cable, adsl, distribution, manufacturing etc) - hence increase in price of oil is like a hidden taxation (and there is a huge tax chank anyway).

Adjust the interest rate for the price of oil - cut it and be smart - control internal inflation drivers and help economy on the other hand.

p.s.
Interest rate does affect price of petrol due to a cost of financing patrol tanks at garages. The higher it is, the more it affects price as petrol will stay for longer.

Dan_Collins_2

OK, regarding mortgages unless you are already in a base rate tracker (I am guessing you are SuperV) a drop will make no difference.

Oil prices will make our lives tough for a while and the BOE cant do a thing a bout it. We need a stable BOE BR for a while but increases will happen.

Datasafe_2

The pound is not tanking, in fact it is higher than it was a little while ago. It will tank if you cut interest rates. Oil is priced in Dollars so cutting IR will push the price up.

Cutting interest rates is not the answer, look at Japan. Has the US solved all of its problems with an IR of 2% ?? No.

Your posts are very familiar and have a very Mr Broderick type blinkered approach.

monkeymaster

Datasafe wrote: »

The pound is not tanking, in fact it is higher than it was a little while ago. It will tank if you cut interest rates. Oil is priced in Dollars so cutting IR will push the price up.

Cutting interest rates is not the answer, look at Japan. Has the US solved all of its problems with an IR of 2% ?? No.

Your posts are very familiar and have a very Mr Broderick type blinkered approach.

Well said, lower rates = weaker currency = more expensive imported goods, such as oil, clothes (erm in fact most things) which then in turn creates more inflation.

SuperV

BoE Basic interest rate is higher than Eurozone one (25%), but still pound dropped from 1.4 to 1.25 euro.

With a crash it will drop further as the economy activity will slow down even more. For a long period of time.

Rate cut is a rate adjustment as it really should be. BoE can't control external inflation drivers (Britain is a small potato...), so the Government should exclude external influence from inflation measurement.

p.s.
You still believe that a miracle will happen and the UK will avoid depression if nothing is done?

monkeymaster

SuperV wrote: »

BoE Basic interest rate is higher than Eurozone one (25%), but still pound dropped from 1.4 to 1.25 euro.

With a crash it will drop further as the economy activity will slow down even more. For a long period of time.

Rate cut is a rate adjustment as it really should be. BoE can't control external inflation drivers (Britain is a small potato...), so the Government should exclude external influence from inflation measurement.

p.s.
You still believe that a miracle will happen and the UK will avoid depression if nothing is done?

Pound's fall against the Euro is down to rate expectations, Euro rates have looked like the were on the increase for a while where as here rates have been falling resulting in money being moved from sterling to euros. It's all relative not about absolute numbers. The pounds fall is also testiment to the state our economy is in at the moment.

Slashing rates makes it more likely companies give employees higher wage increases causing an inflationary spiral. In inflationary environments there's no alternative but for higher interest rates, it's tried and tested economic policy. Some short term pain is sometimes better than the alternative.

Datasafe_2

SuperV wrote: »

BoE Basic interest rate is higher than Eurozone one (25%), but still pound dropped from 1.4 to 1.25 euro.

With a crash it will drop further as the economy activity will slow down even more. For a long period of time.

Rate cut is a rate adjustment as it really should be. BoE can't control external inflation drivers (Britain is a small potato...), so the Government should exclude external influence from inflation measurement.

p.s.
You still believe that a miracle will happen and the UK will avoid depression if nothing is done?

You have to understand that the UK no longer have a large manufacturing base, unlike USA Eurozone Japan ect. We import loads. We have the largest trade deficit in Europe - infact the UK government are going to be hauled over the coals for this by the EU.

If you lower rates it will devalue the pound, which make the masses of imported goods much more expensive which in turn creates higher inflation.

Of course you could just say thats all external inflation, lower rates and damn the inflation as you suggest, but would you still accept a 2% pay rise when inflation goes up to 7% or 8% as it would if the BoE do as you suggest.

But go ahead ruin the economy, the only reason you want lower rates is cos you have a nice juicy fat bubble created mortgage that you are struggling to pay, thats the only reason.

Isn't it?

baby_boomer

SuperV wrote: »

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

At the moment his job description suggests he might be sacked for if doesn't raise them. With respect, it's not his call.

If the Prime Minister wants lower interest rates then all he has to do is to raise the inflation target from 2% to 4% and the Bank could cut interest rates tomorrow.

The problem is that Gordon would lose the next election by even more, and that the economy might take decades to recover .