And that is not so much of a statement as a question – I’m genuinely interested to hear your thoughts. We have already seen how the banks are trying to tip people into repossession by raising their SVRs, but when will the government be forced to raise the much debated BoE base rate?
One thing that is clear, is that rate rise fears have been increasing. In an article by This is Money Editor Andrew Oxlade, he states that expectations have recently shifted from early 2016 to late 2014. Why the huge jump in expectations? Inflation.
Yes – inflation has just taken a tumble, and the government would certainly have us believe that they can bring this down to the target 2% by the end of the year, but the public are not buying it. Why? Because they’ve done such a shoddy job at forecasting in the past.
Anthony Doyle at Bond Vigilantes, a highly respected macroeconomist is also less than convinced – in this chart he highlights what a great job the Bank of England have done in predicting the base rate so far:
And with more Quantitative Easing (money printing) on the way, bringing the total to £325 billion to date (yes, that’s a third of a trillion), it’s just a matter of time before this money works it’s way in to our economy. And high inflation means one thing, high interest rates. The intention to inflate our way out of international debts is clear, and this will have an impact on interest rates, whether we like it or not. The clear question is not if, it’s when will rates rise.
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