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  • FIRST POST
    • MSE Guy
    • By MSE Guy 22nd Mar 11, 9:42 AM
    • 1,628Posts
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    MSE Guy
    MSE News: 20-year high inflation fuels rate rise pressure
    • #1
    • 22nd Mar 11, 9:42 AM
    MSE News: 20-year high inflation fuels rate rise pressure 22nd Mar 11 at 9:42 AM
    This is the discussion thread for the following MSE News Story:

    "Soaring inflation is heaping further pressure on the Bank of England to raise interest rates ..."

    Read the full story:
    20-year high inflation fuels rate rise pressure




    A similar discussion has already started in another thread but it is only available to view by forum members, hence the creation of this new thread for all.
Page 1
    • StevieJ
    • By StevieJ 22nd Mar 11, 9:48 AM
    • 19,549 Posts
    • 32,539 Thanks
    StevieJ
    • #2
    • 22nd Mar 11, 9:48 AM
    • #2
    • 22nd Mar 11, 9:48 AM
    As long as they don't bow to it and make decisions based on the health of the economy not on what the Daily Mail says.
  • jamesd
    • #3
    • 22nd Mar 11, 10:27 AM
    • #3
    • 22nd Mar 11, 10:27 AM
    I expect that the BoE will ignore short term variations and remember that what it does now will have an effect in 18 months or so. It's long past the point where it could do anything about inflation figures today.
    • lisyloo
    • By lisyloo 22nd Mar 11, 10:37 AM
    • 24,290 Posts
    • 12,718 Thanks
    lisyloo
    • #4
    • 22nd Mar 11, 10:37 AM
    • #4
    • 22nd Mar 11, 10:37 AM
    I expect that the BoE will ignore short term variations
    Do you think oil and gas prices are short term variations?
    I see this as part of a worrying longer term trend and think that now is the time to act.
    • edinburgher
    • By edinburgher 22nd Mar 11, 10:56 AM
    • 11,501 Posts
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    edinburgher
    • #5
    • 22nd Mar 11, 10:56 AM
    • #5
    • 22nd Mar 11, 10:56 AM
    Do you think oil and gas prices are short term variations?
    I see this as part of a worrying longer term trend and think that now is the time to act.
    I think that they probably are to a certain extent. While I believe that peak oil has been reached, there is hopefully enough left to tide us over (no pun intended) until we can begin the (painful) transition to far higher usage of renewables and sensible application of carefully sited, modern nuclear power plants. Definitely time to act tho - let's hope this green investment bank actually does something

    Recent instability in the middle east has certainly had a big impact on prices, but there's no reason to assume that they'll remain permanently inflated from now until supplies run out to the point that the oil producing nations won't be willing to sell.

    It's long past the point where it could do anything about inflation figures today.
    Completely agree with jamesd on this one - while I don't think the BoE has being doing a particularly great job of things, they need to stay the course with measures that aren't particularly palatable in the hopes of taming inflation in the long term. It's a bit like the coalition government - they're facing widespread condemnation (pun intended), but if they actually manage to minimise the deficit things might look very different for their popularity in 2-3 years.. Unfortunately sucking it up looks like the only option until the opposition want to come up with a credible alternative.

    I guess all we can do for now is try to inflation-proof some of the daily essentials that will no doubt bounce in price over the next year. I'm not quite at the stage of hoarding beans, but I will be using an interest free loan from my employer to buy an annual rail ticket before prices go up, I already have a year's supply of razor blades bought on offer and I'll be buying 100 stamps before they put the price up on those...
    • Milarky
    • By Milarky 22nd Mar 11, 12:00 PM
    • 6,290 Posts
    • 2,209 Thanks
    Milarky
    • #6
    • 22nd Mar 11, 12:00 PM
    • #6
    • 22nd Mar 11, 12:00 PM
    Is it futile, therefore, to even speculate how high inflation is going to go at this rate - given the Governor has all but said he 'expects' to see it [CPI] above 5% in the short term anyway - and his track record on being accurate is dire? [remember when he said last year that CPI was going to come down 'sharply']

    And is it also futile to question the MPC's use of the 'anydifference defence' [as in 'raising rates now can't make any difference because inflation is mostly imported, you see' and it takes at least 18 months to see the effects of this come through]? Where where they 18 months ago then? What were they stressing about imported deflation from China during most of the last decade which meant that rates should actually set be higher than those benign conditions allowed in order to keep control of domestic price rises?

    [Nah, it all goes into the 'too difficult' box in the end - in other words they give up and stare at the ground]
    .....under construction....
  • jamesd
    • #7
    • 22nd Mar 11, 12:03 PM
    • #7
    • 22nd Mar 11, 12:03 PM
    Do you think oil and gas prices are short term variations?
    Originally posted by lisyloo
    Yes.

    Have you read anything about shale gas and how there are huge amounts of gas newly obtainable in much of the world that wasn't economically obtainable before? It's of huge long term importance for the price of fossil fuel energy and chemical feedstocks.

    The events in Japan that will increase the demand for natural gas for power generation and in the Middle East and Africa are only short term, not decades or a century or two. The Japanese events may well last for a couple of years but production of oil can be increased to help to deal with it.

    I see this as part of a worrying longer term trend and think that now is the time to act.
    Originally posted by lisyloo
    I'd certainly welcome more rapid movement on expanding the use of nuclear power so we can reduce the effect of oil and gas on politics and global warming.
    • RobStaffs
    • By RobStaffs 22nd Mar 11, 3:10 PM
    • 295 Posts
    • 47 Thanks
    RobStaffs
    • #8
    • 22nd Mar 11, 3:10 PM
    • #8
    • 22nd Mar 11, 3:10 PM
    The Cash Isa rates for fixed term are pretty lamentable when you see the trend in inflation.I wonder if anyone will break ranks and offer an inflation buster Isa ? Until then we are faced with tying up about 100k at 3%
    • talexuser
    • By talexuser 22nd Mar 11, 4:52 PM
    • 2,694 Posts
    • 2,120 Thanks
    talexuser
    • #9
    • 22nd Mar 11, 4:52 PM
    • #9
    • 22nd Mar 11, 4:52 PM
    Well as long as the top bankers keep getting 40-50% total rises every year (slightly cut bonus + massive base salary increase), then the difference between 2 or 5% inflation isn't really that important is it? The rest of us obviously don't matter
    • jimjames
    • By jimjames 22nd Mar 11, 6:09 PM
    • 13,234 Posts
    • 12,297 Thanks
    jimjames
    The Cash Isa rates for fixed term are pretty lamentable when you see the trend in inflation.I wonder if anyone will break ranks and offer an inflation buster Isa ? Until then we are faced with tying up about 100k at 3%
    Originally posted by RobStaffs
    Compared to the Base Rate they are still not bad. I'm sure when rates were higher they weren't nearly 3% above base and if the banks can get funds why would they increase them.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • RobStaffs
    • By RobStaffs 22nd Mar 11, 6:58 PM
    • 295 Posts
    • 47 Thanks
    RobStaffs
    Compared to the Base Rate they are still not bad. I'm sure when rates were higher they weren't nearly 3% above base and if the banks can get funds why would they increase them.
    Originally posted by jimjames
    The Halifax are offering 4.4% for a 4 year fixed.I think inflation will fall pretty quickly.This might be a decent option.
  • manchesterred
    As long as they don't bow to it and make decisions based on the health of the economy not on what the Daily Mail says.
    Originally posted by StevieJ
    Just in the name of even handedness

    http://www.morningstaronline.co.uk/index.php/news/content/view/full/102564
    • oldvicar
    • By oldvicar 23rd Mar 11, 1:31 AM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    The 'good news' headlines could of course read:

    "Billions wiped off UK debt in real terms"

    "Millions of Britons to find it easier to repay their debts"

    "House prices set to rise again"

    All thanks to super soaraway inflation.

    No wonder that the Chancellor seems content to turn a blind eye to the Governor's failure to keep inflation under control - he probably tipped him the wink.
    • jimjames
    • By jimjames 23rd Mar 11, 7:26 PM
    • 13,234 Posts
    • 12,297 Thanks
    jimjames
    Just read this article that suggests UK inflation is now higher than in Zimbabwe!

    http://blogs.telegraph.co.uk/news/danielhannan/100080317/uk-inflation-rate-is-now-higher-than-zimbabwes/
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Kohoutek
    • By Kohoutek 23rd Mar 11, 8:00 PM
    • 2,709 Posts
    • 5,664 Thanks
    Kohoutek
    No wonder that the Chancellor seems content to turn a blind eye to the Governor's failure to keep inflation under control
    Originally posted by oldvicar
    Why do you think that higher interest rates will make food, cotton and oil cheaper?
    • oldvicar
    • By oldvicar 24th Mar 11, 7:58 PM
    • 1,068 Posts
    • 944 Thanks
    oldvicar
    Why do you think that higher interest rates will make food, cotton and oil cheaper?
    Originally posted by Kohoutek

    I didn't mention interest rates, nor the price of particular commodities that may or may not be included in the inflation rate. But YES, higher interest rates would lead to a strengthening of the pound and these things getting cheaper in sterling terms. I am not saying whether this would be a good or bad thing though.

    What I did comment on was just the BoE's failure to (even try to) achieve the target set for them and some of the (politically beneficial) effects of high inflation. In my view BoE and Government both expect and are happy for inflation to be higher than stated targets, but it works to borrowers' (including Government's) advantage not to admit it else the cost of borrowing would be much higher. To some extent the market knows this, the cost of borrowing having much less correlation to the official Base Rate than has hitherto been the case.
    • dunstonh
    • By dunstonh 24th Mar 11, 8:11 PM
    • 98,597 Posts
    • 66,995 Thanks
    dunstonh
    Just to give more balance...

    Economists tell MPs we may have deflation next year

    http://www.moneymarketing.co.uk/news/budget-2011/budget-2011-economists-tell-mps-we-may-have-deflation-next-year/1028409.article


    We have to remember that the current inflation figure is artificially higher due to the VAT rise. Strip that out and the figure is more reasonable.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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