Sky News business editor Michael Wilson
When in doubt, do nowt – but that's not what the Bank of England's interest rate setters did.
Certainly they kept rates on hold, and so might have appeared to have done nothing, but the no change decision sends a positive message.
The Bank is waiting for a slowdown before it makes its move. That could be painful.
All the normal indicators for an interest rate cut are flashing.
Growth is slowing, demand is at a two and half year low. Household spending is slowing.
Certainly the January sales threw up some strong figures but many of the shopping fraternity agreed that it was more of a last gasp before the big bills come in.
And no question about that. The average household is £5 a week worse off than it was last year.
If that doesn't sound a lot then figure this against your own outgoings. They are on average up 5%.
While a frightening 3.2 million of our fellow Britons are are juggling their previous purchases on five or more credit cards – and that's a whole other subject – all the signs are that household spending is slowing.
But the case for putting off a rate cut was obviously stronger, and our Money Panel predicted the same, although two of them, had the decision been theirs, would have cut by as much as a half.
That said though, it's the inflationary worries which made them stay their hand. I think most people now regard the official inflation statistics as unrealistic, but the headline rate it still well above the government's target of 2%.
With oil now established over $100 a barrel, petrol prices, which are already 20% higher on the year will only increase.
Goods leaving factories are showing the fastest price rises in 16 years – and most ominously the CBI reported that high street retailers will start putting their prices up as soon as they can.
So the Bank stuck to its first task of controlling inflation. Now the painful bit.
The main signal from all this is that the Monetary Policy Committee is waiting for big slowdown signs before they cut.
One of those will be lay-offs. Rising unemployment. Think about it. Add it in to the other three problems we already have - falling house prices, tougher credit conditions and higher inflation. Not a pretty picture.
Pop on to the YouGov site and you'll find many [New Labour] punters who believe the world - or our economy - is all rosy. Point out the opposite, with sources to back it, and they flee the debate.
What is it with sheeple...?
Posted by: Fluffy, London, England 7 Mar 2008 06:32:31
Sir
Thus far as the rate of interest within many a household,certainly the rising thought inflates many a souflet, however, like the cooking pot, unless the gas is controlled, food will be burnt.
As the bank has therefore decided to enusre the daily bread arrives no matter what the outer temperature, surely to rely upon many a promise by such other govern mental utilitiies would not be in the interest of those controlling many an inflated belly.
However, as the house settles many a market jitters to come and further avoids the slippery slopes surrounding many an oil barron, unless we all help Mervyn to control inflation then I'm afraid we wont be able to blame the King for harder times.
So, [Dj Shog-This Is My Sound]
(PS: For the avoidance of doubt 'we all'means Gas, Water,Electric and other such corporates proividing lifes' essentials, notwithstanding supermarkets.)
Posted by: Khalid 6 Mar 2008 20:02:06
Well, I am one who packed up and left, after years of being a small business man receiving little or no empathetic feed back from various institutions, yet expected to pay taxes, VAT council tax, and every other stealth tax, I sold up and left for Greece. I have now been here for a year. Now however I find that the international economic climate is weakening the pound against the Euro so much that my sterling account over here is frankly having the stuffing knocked out of it. I fail to understand fully why it is when raging inflation looks inevitable in the UK, how it is that interest rates can or indeed should be cut at all. My prediction is that the UK banks will be hard pushed not to raise rates over 2008. So be prepared.
Posted by: Andrew. Greece 6 Mar 2008 16:37:55
Well, I am one who packed up and left, after years of being a small business man receiving little or no empathetic feed back from various institutions, yet expected to pay taxes, VAT council tax, and every other stealth tax, I sold up and left for Greece. I have now been here for a year. Now however I find that the international economic climate is weakening the pound against the Euro so much that my sterling account over here is frankly having the stuffing knocked out of it. I fail to understand fully why it is when raging inflation looks inevitable in the UK, how it is that interest rates can or indeed should be cut at all. My prediction is that the UK banks will be hard pushed not to raise rates over 2008. So be prepared.
Posted by: Andrew. Greece 6 Mar 2008 16:23:25
It's no wonder then that plenty (too many) decent people are fast leaving the country - to be replaced no doubt by keen workers wanting the minimum wage (or less) and any social housing they can pick up.
Meanwhile those evicted by the Government Mortgage Company and others will have few, if any, houses to go to.
Posted by: Dennis, Cramlington Northumberland 6 Mar 2008 12:47:39