Wednesday, 20 June 2007

Inflation - more bad news; interest rates up in July.

Last month, our old friend Mervyn King wanted to raise rates, but the majority of the MPC were afraid that a sudden hike might spook the financial markets. The minutes of last month’s BOE Monetary Policy Committee meeting revealed a far closer vote to raise rates than the market anticipated. Going forward, a further interest rate hike in July looks like a certainty.

The BOE had to confront further bad news today. The UK's Money Supply raced ahead at a 13.8 percent annual rate. Meanwhile, the bank's regional survey indicated that the UK economy was suffering from capacity constraints everywhere. It all points to significant inflationary pressure.

Higher interest rates on the way, slowing housing market; there is light at the end of the tunnel; the bubble is about to burst.


trampjuicerocks said...

For many years now, the UK money supply has been growing - 9%, 13%, 13% - but there is no sign of inflation - other then house price inflation which is where the money goes.

The BOE say this. (They call it declining velocity of money, which is rising money to small increases in GDP).

This huge rise in landlord wealth, leaving you a modern day slave, is just a side effect of the horrors that mass immigration has in store for you as your own country is sold out from under you.

Anonymous said...

"there is light at the end of the tunnel; the bubble is about to burst"

Don't gloat too much. A deflating bubble may take the rest of the economy with it.

Anonymous said...

Another desperate renter who is afraid to put their hands in their pocket and pay the going rate for a house.

House prices are high, they always have been, deal with it, get used to it, or rent for ever.

Hope that helps

Anonymous said...

Wrong- house prices have never been this high in real terms and relative to income.

lowbudgetlife said...

A wonderful bubble-blog. We need to add HPI to RPI and call THAT inflation not the CPI based largely on the price of undurable sweatshop tat.

delusional said...

I just hope that when the housing market comes crashing down that the pound doesn't go with it immediately.

I'd still quite like to emigrate.

Anonymous said...

I agree - higher rates are on their way but the BoE is extremely wary about unsettling the housing market because so much of the strength of this economy has come to rely on it.

People have been calling a crash in the UK since 2000. It's a little naive to think further rate rises - especially at the incrementally sluggish rate of 25 basis points a pop - is going to bring about the crash everyone is expecting.

The crash will happen, as every bear eventually has their day. But i don't see it happening all of a sudden as a result of slow incremental IR increases. There is still too much cheap money sloshing about, as well as many BTL re-investors and the Bank of Mum and Dad helping nearly 50% of first time buyers with their deposits.

Anonymous said...

Thank you for this great very informed website.

This crash started at the beginning of the year, I believe. The UK HPI figures have been skewed by London & Northern Ireland. Believe Fred Harrison's book hit the nail on the head, for the second time.

I find it amazing that people can not see what it coming and are happy to just keep taking on more debt. This is going to be very painful for many soon.

P.S. your interest rates mantra is great, keep up the good work.

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