Reply to: GBP in crisis, interest rates increase to save pound

[chopper]

Typically interest rates are used to cool an overheating economy, low interest rates to create corporate investment and consumption, high interest rates to reduce consumption and stop inflation going out of control.

Right now we have a scenario where inflation isn't being caused by an overheating economy, but rather a weak pound. The LAST thing the economy needs is higher interest rates to curb investment as that will tip the economy over the edge. The inflationary pressures of a weak pound will resolve themselves within a year.

Higher interest rates will improve sterling - it is doing well against USD, at a high point since September 2016 (other than one random day in May) but not so well against EUR which suggests it isn't a strengthening pound but a weakening dollar. Improved sterling reduces inflation, but runs the risk that businesses start hoarding cash instead of investing (and employing).

The weak pound is, of course, caused by the Tory wet dream of a Hard Brexit.

[AtW]

The only deflating thing will be wages...

[eek]

We still have the deflation crisis to hit before the inflation stagflation future....

[AtW]

3% will be the new normal.

You've heard it on here first...

Interest on mortgages will be about the same as it was when rates were 5-6% - bigger margin for banks.

Interest on savings will be still next to zero...

[sasguru]

I hope they put it up by 5%. That's an extra 50k a year to me in interest payments.

I'd love that, but they won't. An interest rate of 5- 6% is still low in historical terms.
But, the economy would collapse like a deck of cards.
Just goes to show how our so-called "prosperity" is just smoke and mirrors held together by the quick heroin fix of free money.

[MrMarkyMark]

Carney! Carney! Carney!


Go Carney!


I knew that useless, overpaid, Canadian chunt would pay dividends in the end.


Looks like these may still be worth something at least.

[MarillionFan]

I hope they put it up by 5%. That's an extra 50k a year to me in interest payments.

[MrMarkyMark]

What a croc.

GBP is almost at its highest since Nov 2016.

May it keep going.

Going to suit me down to the ground

[northernladyuk]

Which is still more than Swindon.....

In Brum you don't have to share your outdoor lav.

[ChimpMaster]

GBP in crisis, interest rates increase to save pound...

... within days.

What a croc.

GBP is almost at its highest since Nov 2016.

[BrilloPad]

£40 / week above a kebab shop.

Which is still more than Swindon.....

[northernladyuk]

Ah yes. I forgot how cheap bedsits are in Brum. Apologies.

£40 / week above a kebab shop.

[BrilloPad]

What's mortgage?

Ah yes. I forgot how cheap bedsits are in Brum. Apologies.

[AtW]

As you now have a mortgage, you should be pleased....

What's mortgage?

[BrilloPad]

Carney suddenly change his tone (again), and this time he supports rate increases...

The Feds are increasing rates nicely, BoE and ECB should follow just like they did (in agreement) dropped interest rates.

Banks probably won't increase it for savers though

As you now have a mortgage, you should be pleased....