Speculation over interest rate rise

Witney Gazette: The MPC is due to meet this week The MPC is due to meet this week

Bank of England rate setters will meet on Thursday amid increasing speculation that the burgeoning recovery will soon see cracks emerge in the current consensus on the cost of borrowing.

It is regarded as certain that interest rates will remain on hold at 0.5% this week but observers detect signs that policy makers disagree over key indicators of the economy's improvement which may widen into dissent in the months ahead.

Easing inflation coupled with first quarter growth that fell slightly short of expectations should be enough to persuade the Monetary Policy Committee (MPC) that it is not yet time to bring an end to the low rates that have nursed the UK back to health.

But a fall in unemployment to 6.9% has now formally freed the MPC from the straitjacket of its "forward guidance" policy under which no rise could be considered until joblessness fell to 7%.

The Bank has now updated the guidance to indicate that it will use a more opaque measure of "spare capacity" in the economy and that more of this so-called "slack" must be taken up by the recovery before interest rates can be lifted.

Minutes of the latest MPC meeting in April indicated disagreement about this key factor.

They revealed there was a "range of views" about whether many self-employed people were in fact under-employed and looking for work as employees. That would imply a greater degree of ''slack'' in the economy than the headline jobs figures would suggest.

Investec economist Philip Shaw said: "The loose nature of the new framework, with the aim of eliminating economic slack within 2-3 years, allows considerable scope for a range of views on the committee, and we fully expect this to be reflected in more robust policy debate and in due course, dissent.

"But for the time being the economy is growing healthily without overheating and there seems to be no immediate pressure points in terms of the inflation outlook. Accordingly next week's decision should once again be a clear and uncontroversial 'no change'."

Howard Archer of IHS Global Insight said: "While a near-term interest rate hike remains extremely unlikely opinions within the Bank of England are likely to become more diverse over the coming months about exactly when monetary policy should start to be gradually tightened.

"The more MPC hawkish members may well start to favour a first small rate hike before the end of 2014."

Analysts broadly expect to see the first rate rise next spring.

Comments (4)

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5:20pm Sun 4 May 14

MSG says...

I urge them to put up interest rates ASAP. I have a significant redundancy payment sat earning little interest after the Labour Party messed up the economy and cost 460 of us our jobs in 2009 !!!!!!!!!!.

I got on my bike though !
I urge them to put up interest rates ASAP. I have a significant redundancy payment sat earning little interest after the Labour Party messed up the economy and cost 460 of us our jobs in 2009 !!!!!!!!!!. I got on my bike though ! MSG
  • Score: 2

5:37pm Sun 4 May 14

TheBrotherhoodOfTheBell says...

we cant go on propping up the young housing market with cheapo money, so that you can carry on enjoying your alcop and takeaway lifestyles.
all of you need to start cutting back on your white German built cars, your Karen millen couture and your gelled up hair lifestyles and stop buying what you cannot afford on the backs of savers.
in 1992 i was paying 16% !!!! yes 16 F*****G % on my mortgage i lost my bloody home and had to start all over again.
you cook your own food no more takewayays no more ciggs and drugs.
you are going to have to start paying your way and not on the backs of savers.
you have had 6 years of low rates now pay up. cut your cloths according to your means.
no one gets free money 3%, is a total farce. if you cant afford a home then stay with your mum and dad or rent. as for those who buy whacking big three bedroom houses brand new off plan, you need your brains testing for greed syndrome. start off with something smaller, but you wont will you?
you expect us to subsidise it for you with cheap money. if you think about it working or not its another form of parasitic sponging what's the difference.
in the words of Dire Straights:
MONEY FOR NOTHING AND YOUR CHECK FOR FREE:
we cant go on propping up the young housing market with cheapo money, so that you can carry on enjoying your alcop and takeaway lifestyles. all of you need to start cutting back on your white German built cars, your Karen millen couture and your gelled up hair lifestyles and stop buying what you cannot afford on the backs of savers. in 1992 i was paying 16% !!!! yes 16 F*****G % on my mortgage i lost my bloody home and had to start all over again. you cook your own food no more takewayays no more ciggs and drugs. you are going to have to start paying your way and not on the backs of savers. you have had 6 years of low rates now pay up. cut your cloths according to your means. no one gets free money 3%, is a total farce. if you cant afford a home then stay with your mum and dad or rent. as for those who buy whacking big three bedroom houses brand new off plan, you need your brains testing for greed syndrome. start off with something smaller, but you wont will you? you expect us to subsidise it for you with cheap money. if you think about it working or not its another form of parasitic sponging what's the difference. in the words of Dire Straights: MONEY FOR NOTHING AND YOUR CHECK FOR FREE: TheBrotherhoodOfTheBell
  • Score: -1

6:40pm Sun 4 May 14

Nelly99 says...

OMG. forgive me as a stupid old git but WTF are you doing? Can you not see that continued low interest rates encouraging extensive borrowing on the basis that " Oh look how good is this" will only lead to more inflation and another sooner than expected collapse. I only speak as one who has money invested and would like to see a return to sensible rates. I don't think the people advising the BOE like Fred Carno have any idea about the economy. What we need is a realistic approach. The need to acknowledge that there is progress and if you continue to lend on this basis you will be back in the ****.
OMG. forgive me as a stupid old git but WTF are you doing? Can you not see that continued low interest rates encouraging extensive borrowing on the basis that " Oh look how good is this" will only lead to more inflation and another sooner than expected collapse. I only speak as one who has money invested and would like to see a return to sensible rates. I don't think the people advising the BOE like Fred Carno have any idea about the economy. What we need is a realistic approach. The need to acknowledge that there is progress and if you continue to lend on this basis you will be back in the ****. Nelly99
  • Score: 3

10:51am Mon 5 May 14

Chippy70 says...

TheBrotherhoodOfTheB
ell
wrote:
we cant go on propping up the young housing market with cheapo money, so that you can carry on enjoying your alcop and takeaway lifestyles.
all of you need to start cutting back on your white German built cars, your Karen millen couture and your gelled up hair lifestyles and stop buying what you cannot afford on the backs of savers.
in 1992 i was paying 16% !!!! yes 16 F*****G % on my mortgage i lost my bloody home and had to start all over again.
you cook your own food no more takewayays no more ciggs and drugs.
you are going to have to start paying your way and not on the backs of savers.
you have had 6 years of low rates now pay up. cut your cloths according to your means.
no one gets free money 3%, is a total farce. if you cant afford a home then stay with your mum and dad or rent. as for those who buy whacking big three bedroom houses brand new off plan, you need your brains testing for greed syndrome. start off with something smaller, but you wont will you?
you expect us to subsidise it for you with cheap money. if you think about it working or not its another form of parasitic sponging what's the difference.
in the words of Dire Straights:
MONEY FOR NOTHING AND YOUR CHECK FOR FREE:
I always thought it was "money for nothing and you're chicks for free" Oh well ....
[quote][p][bold]TheBrotherhoodOfTheB ell[/bold] wrote: we cant go on propping up the young housing market with cheapo money, so that you can carry on enjoying your alcop and takeaway lifestyles. all of you need to start cutting back on your white German built cars, your Karen millen couture and your gelled up hair lifestyles and stop buying what you cannot afford on the backs of savers. in 1992 i was paying 16% !!!! yes 16 F*****G % on my mortgage i lost my bloody home and had to start all over again. you cook your own food no more takewayays no more ciggs and drugs. you are going to have to start paying your way and not on the backs of savers. you have had 6 years of low rates now pay up. cut your cloths according to your means. no one gets free money 3%, is a total farce. if you cant afford a home then stay with your mum and dad or rent. as for those who buy whacking big three bedroom houses brand new off plan, you need your brains testing for greed syndrome. start off with something smaller, but you wont will you? you expect us to subsidise it for you with cheap money. if you think about it working or not its another form of parasitic sponging what's the difference. in the words of Dire Straights: MONEY FOR NOTHING AND YOUR CHECK FOR FREE:[/p][/quote]I always thought it was "money for nothing and you're chicks for free" Oh well .... Chippy70
  • Score: 0
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