AIBU?
to believe interest rates should be at least 4% already, and rising fast?
LargeDeviation · 05/09/2022 19:34
1.75% base rate is pathetic in the face of double digit inflation.
The Bank of England has been much slower than the Fed in raising rates, and this is one of the main reasons why sterling is weakening - not the only one of course. Gas and oil are priced in dollars and energy prices are the dominant contributor to inflation, so we should strengthen the pound wherever we can.
The BoE has been far too timid to raise rates going back to Mark Carney. He had several opportunites to raise rates and even gave unemployment thresholds at which he would do it, but when unemployment went far lower he invariably lost his nerve.
Andrew Bailey is even worse. He should have cut QE and started raising rates as soon as it was clear that vaccines were working in early 2021 - or at least when it was clear that omicron was mild. It was clear far before the war in Ukraine that the post-vaccine boom would cause at least some significant inflation. Even after the war started, he has been so timid in acting! Tiny 0.25% and 0.5% raises.
Yes, raising rates will reduce cashflow, reduce house prices, and even possibly cause negative equity to those on high LTV variable mortgages, or those remortgaging soon. And yes it will reduce credit available to households and businesses, which would be difficult.
However with inflation you need to act fast and act big to get people to believe you are serious about taming it, otherwise expectations take hold and it becomes embedded. It is easy to cut rates again a bit afterwards.
If any of the MPC are reading: stop quivering, stop with the Lilliputian raises, and remember that your mandate isn't about the broader economy but to keep inflation under control!
Am I being unreasonable?
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oiltrader · 22/09/2022 20:33
towelhammer · 22/09/2022 17:42
@Snoozer11 I think prices are ridiculous and are damaging so many parts of our society however I'm not sure the Tories will allow the drop hence the stamp duty prop
the interest rate increases will make the stamp duty saving look tiny
AdamRyan · 22/09/2022 21:10
Oh not this "debt junkie" nonsense again. We did this upthread. You are in cloud cuckoo land if you think the only people screwed by high interest rates are people who've over stretched themselves. Its going to be everyone with a mortgage or renting I.e. pretty much the entire working age population.
The only people who will do ok out of it are mortgage free aka retired mainly tory voters
red4321 · 22/09/2022 21:27
I attended a presentation by two fund managers tonight and they were extremely critical of the central banks' inability to control inflation. They showed a graph of the Bank of England's inflation forecast revisions this year and how wrong they were.
Debt aside, it made for extremely depressing viewing about the likely health of global stock markets for the next few years. They made the point that even historically 'safe' assets such as bonds have tanked this year due to rising interest rates.
happyfishcoco · 22/09/2022 22:40
AdamRyan · 06/09/2022 12:13
Maybe you need to have a play with a mortgage calculator and put in today's rate vs 15% on a 20 year mortgage
antelopevalley · 06/09/2022 10:49
And unless your mortgage payments are interest only, I am not sure why your payments would triple.
yes, 2% to 15% is triple. BUT, why assume 15%??? it's not gonna happen.
from 2000, the highest mortgage rate is 6%.
LargeDeviation · 26/09/2022 11:12
After Kwasi's unfunded nonsense on Friday we need an emergency rate rise otherwise we're going to have a total sterling meltdown.
Bailey can't bottle it again. An immediate 2% rate rise would send the signal to the markets that he will do whatever it takes to keep control.
MarshaBradyo · 26/09/2022 11:20
Quincythequince · 26/09/2022 11:16
No it’s not. It’s already recovering.
tablep · 26/09/2022 11:12
what happens now, as the pound is tanking
How long before the BBC switches from the pound hits all time low to the pound is recovering. They were back in full Covid mode first thing
GasPanic · 26/09/2022 11:27
In the light of the new budget, the 0.5% rate rise looks pathetic.
I'm not sure they will go for an emergency rate rise, but even if they don't I reckon the next rise (November IIRC) is going to have to be strong to convince the markets they are going to bring inflation under control.
One thing to remember though is that the BOE interest rate does not actually set the price of money. It simply puts a floor under the price (because anyone can go to the BOE and get that rate).
The market in reality sets the price of money and that price is dominated by the price the Fed sets.
So interest rates would be increasing rapidly even if the BOE held their rate down. Basically we are on a trajectory not under our control, and always have been.
Watching to see whether the Tories can save the housing market with interest.
happyfishcoco · 26/09/2022 13:48
Quincythequince · 26/09/2022 11:16
No it’s not. It’s already recovering.
tablep · 26/09/2022 11:12
what happens now, as the pound is tanking
omg, the pound is the lowest today!!!
almost 1:1 to USD......
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