National News Interest rates

[LowerSouth]

Bold move

Back to March 2020 rate .
Won’t have any real day to day effect, other than psychological.
More of a signal from the BoE.

 

[MC Yellow]

Why?

In the sense that many businesses have increased debt during the pandemic, are now facing another wave of significant disruption and the threat of another circuit break in the New Year hanging over them, throwing in a pre Christmas rate rise is pretty ballsy and surprising.

Inflation is a very odd number at the moment, driven less by people with lots of money to spend, spend, spend and more by post lockdown supply and demand issues.

Raising interest rates will probably do nothing to change the cost of oil and gas supplies.

 

[Foley]

I think they should look to get interest rates up gradually. The hope is that it’s not been left too late to attempt s9me control of inflation

I am not sure in this case whether interest rate rises will halt inflation.
Much of it is driven by the huge increases in fuel prices ( worldwide problem) and supply shortages
The BoE seem to think that inflation will peak at 6% or so.
COVID is still a huge issue and will rightly make the BoE cautious about raising interest rates quickly

 

[QR]

In the sense that many businesses have increased debt during the pandemic, are now facing another wave of significant disruption and the threat of another circuit break in the New Year hanging over them, throwing in a pre Christmas rate rise is pretty ballsy and surprising.

Inflation is a very odd number at the moment, driven less by people with lots of money to spend, spend, spend and more by post lockdown supply and demand issues.

Raising interest rates will probably do nothing to change the cost of oil and gas supplies.

It doesn't matter if inflation is driven by external factors, the bottom line is that the BoE is tasked to keep inflation as close to 2% as possible. It will take a view on all these factors and many more before considering what the base rate should be. There is an argument that as it can't influence e.g oil prices it has to play its base rate hand even firmer. I'm not saying it's right or wrong, I'm just saying this is the role the BoE has been given and so this action shouldn't be seen as 'bold'. Remember we are only talking 0,25%.

 

[Foley]

It doesn't matter if inflation is driven by external factors, the bottom line is that the BoE is tasked to keep inflation as close to 2% as possible. It will take a view on all these factors and many more before considering what the base rate should be. There is an argument that as it can't influence e.g oil prices it has to play its base rate hand even firmer. I'm not saying it's right or wrong, I'm just saying this is the role the BoE has been given and so this action shouldn't be seen as 'bold'. Remember we are only talking 0,25%.

I agree that this is the BoEs task but they rarely JUST look at interest rates and inflation.
They have on a number of occasions suggested that they are also looking at the overall economy and unemployment as well as inflation
At the moment, whilst inflation is high and a risk, looking just at inflation, in my view would be very dangerous to the economy.

 

[QR]

I agree that this is the BoEs task but they rarely JUST look at interest rates and inflation.
They have on a number of occasions suggested that they are also looking at the overall economy and unemployment as well as inflation
At the moment, whilst inflation is high and a risk, looking just at inflation, in my view would be very dangerous to the economy.

You're conflating two things. Yes it gives its option as to where the economy is going and at what speed but that is separate from its mandate to use interest rates (and quantitative easing to be fair) to bring inflation down to, or up to, 2%.

 

[Foley]

You're conflating two things. Yes it gives its option as to where the economy is going and at what speed but that is separate from its mandate to use interest rates (and quantitative easing to be fair) to bring inflation down to, or up to, 2%.

No I am.not conflicting the 2 things.
I totally understand the mandate the BoE have been given.
What I am saying is that in the past when inflation has gone over 2% they have in the past pointed to other economic factors as to why the have not raised interest rates.

 

[QR]

No I am.not conflicting the 2 things.
I totally understand the mandate the BoE have been given.
What I am saying is that in the past when inflation has gone over 2% they have in the past pointed to other economic factors as to why the have not raised interest rates.

Absolutely, and it would have done the same this time. Controlling the things it can.

 

[Foley]

You're conflating two things. Yes it gives its option as to where the economy is going and at what speed but that is separate from its mandate to use interest rates (and quantitative easing to be fair) to bring inflation down to, or up to, 2%.

I am not confusing the two things.
It has been clear for a while that inflation would go over 2%. The BoE said last month that it is likely to be 5% well into next year.
If the only thing the BoE looked at was inflation they would have raised interest rates last month ( or before).

 

[Peterdev]

I personally think they should have increased the interest rates last month.
I think it’s fair to say that fuel prices have increased inflation because of higher transport costs which filters into the shops. There will inevitably be higher labour costs too, lorry drivers and supermarket workers to mention a couple.
The nurses should getting more than 1%pa increase. I’m sure that will get remembered when the voters go the polls in the upcoming by elections and general election coming in 2023/4