Reply to: Bank hints at further rate rises

[stackpole]

As I said inflation is not out of control (yet anyway), so hold.

How do you know what the inflation rate will be in 18 months time?

That is what the MPC are trying to control, not the inflation rate today.

Ergo, if their data shows a risk that it will be rising too much in 18 months, they need to forestall it now.

[Fungus]

The entry into the ERM was a Tory act with broad support from the House Of Commons. It turned out to be a screw up and demonstrates that the less power given to politicians of any hue, the better.

Flash Gordon gave the BOE control over the interest rates. However the Tories had already commissioned a study into just that and hence much of the preparation had already been done, allowing it to happen much quicker than otherwise would have been the case. All credit to Flash for doing it though. IMO it is one of the achievements of this government.

[hyperD]

One assumes they use a oiuja board to contact the deceased one?

LOL! Conspirists would say he was about to cast a "rise" vote but Gordo's spooks got him him first.

[hyperD]

But this is the Gov't spin... Because these are so highly paid jobs, itt turns out that they are given to those affiliated with the current 'establishment' ie friends of Blair. That's my point - NOT INDEPENDENT

PS - See my clarification above re: inflation

Of the nine members, five are Bank officials:

Mervyn King, the Governor; two Deputy Governors, Rachel Lomax and Sir John Gieve ; Charles Bean, the chief economist; and Paul Tucker, the head of the markets division.

Four “external” MPC members are appointed by the Chancellor for three-year terms. At present they are:-

Kate Barker, Prof David Blanchflower, Richard Lambert (left) and David Walton (deceased). All new members of the MPC face unofficial confirmation hearings before MPs on the Commons Treasury Committee. However, the MPs have no power of veto over the appointments.

[ALM]

Housing market is probably the ONLY reason to justify putting rates up. As I said inflation is not out of control (yet anyway), so hold. Unemployment which is up can only get worse with higher rates, so hold again.

You obviously didn't bother reading HyperD points about what the government conveniently excludes when calculating inflation. Numpty.

[Numptycorner]

So you want to see some idiot politician set rates based more on short term electioneering, than making sure the economy doen't bust?

[Lucifer Box]

Don't worry, John Reid will save us

Look lads, as hyperD has already hinted, inflation will quickly and efficiently be brought under control by excluding energy prices from the calculation and including DVD players.

In the meantime, keep on borrowing and spending.

Sorted.

[Asterix]

If only ...

But this is the Gov't spin... Because these are so highly paid jobs, itt turns out that they are given to those affiliated with the current 'establishment' ie friends of Blair. That's my point - NOT INDEPENDENT

PS - See my clarification above re: inflation

[Numptycorner]

HyperD You've just justified the raising of interest rates i.e. the Governemnt is conservative in it's targets, and I for one agree that house price inflation etc. should be considered (but of course to some extent it is). Asterix would like to see them held ad infinitum despite real inflation being higher than reported.

Rather interesting..

Each member of the MPC has expertise in the field of economics and monetary policy. Members do not represent individual groups or areas. They are independent. Each member of the Committee has a vote to set interest rates at the level they believe is consistent with meeting the inflation target. The MPC's decision is made on the basis of one-person, one vote. It is not based on a consensus of opinion. It reflects the votes of each individual member of the Committee.

A representative from the Treasury also sits with the Committee at its meetings. The Treasury representative can discuss policy issues but is not allowed to vote. The purpose is to ensure that the MPC is fully briefed on fiscal policy developments and other aspects of the Government's economic policies, and that the Chancellor is kept fully informed about monetary policy.

MPC meetings

The MPC meets every month to set the interest rate. Throughout the month, the MPC receives extensive briefing on the economy from Bank of England staff. This includes a half-day meeting – known as the pre-MPC meeting – which usually takes place on the Friday before the MPC's interest rate setting meeting. The nine members of the Committee are made aware of all the latest data on the economy and hear explanations of recent trends and analysis of relevant issues. The Committee is also told about business conditions around the UK from the Bank's Agents. The Agents' role is to talk directly to business to gain intelligence and insight into current and future economic developments and prospects. .

The monthly MPC meeting itself is a two-day affair. On the first day, the meeting starts with an update on the most recent economic data. A series of issues is then identified for discussion. On the following day, a summary of the previous day's discussion is provided and the MPC members individually explain their views on what policy should be. The Governor then puts to the meeting the policy which he believes will command a majority and members of the MPC vote. Any member in a minority is asked to say what level of interest rates he or she would have preferred, and this is recorded in the minutes of the meeting. The interest rate decision is announced at 12 noon on the second day.

Public accountability: explaining views and decisions

The MPC goes to great lengths to explain its thinking and decisions. The minutes of the MPC meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. The Committee has to explain its actions regularly to parliamentary committees, particularly the Treasury Committee. MPC members also speak to audiences throughout the country, explaining the MPC's policy decisions and thinking. This is a two-way dialogue. Regional visits also give members of the MPC a chance to gather first-hand intelligence about the economic situation from businesses and other organisations.

In addition to the monthly MPC minutes, the Bank publishes its Inflation Report every quarter. This report gives an analysis of the UK economy and the factors influencing policy decisions. The Inflation Report also includes the MPC's latest forecasts for inflation and output growth. Because monetary policy operates with a time lag of about two years, it is necessary for the MPC to form judgments about the outlook for output and inflation. The MPC uses a model of the economy to help produce its projections. The model provides a framework to organise thinking on how the economy works and how different economic developments might affect future inflation. But this is not a mechanical exercise. Given all the uncertainties and unknowns of the future, the MPC's forecast has to involve a great deal of judgment about the economy.

[Asterix]

Numpty- Clarification

Housing market is probably the ONLY reason to justify putting rates up. As I said inflation is not out of control (yet anyway), so hold. Unemployment which is up can only get worse with higher rates, so hold again.

[hyperD]

The Treasury still have an awful amount of influence on the BoE in the fact that the bank cannot determine inflation: the government do.

It's fine when an "independent" body controls the interest rate basing their decisions on factors such as inflation, but when the Treasury have created a new CPI (Chav Price Index), thrown out all the sensible pointers to inflation and filled them with electronic gubbins which are subject to lowering prices, and people base their personal wealth directly on house prices, then we're in trouble. Big trouble.

Employers base their wage rises on the goverments inflation figures, wages are not rising in line with council tax, energy prices, utility prices, fuel prices, housing... the true costs of inflation would send house prices down, end consumer spending with a result of a huge increase in bankruptcies.

I reckon inflation is running 6% (square of the CPI) rather than what the government are stating. Even as house prices have gone through the roof, and the Chancellor has raised taxes more than 60 times since 1997, the CPI has barely budged.

So check the signs people: increasing inflation, increasing oil price, debt on a national scale that has never been seen before, increasing unemployment, government not stating how much money they are printing....

To paraphrase a well know CUK mantra: huge number of borrowers are doomed.

Once the housing market starts to fall, not even the Romanian immigrants can keep the prices steady.

[Numptycorner]

The housing market seems to be booming again, so that's one reason. Inflation is up but not by a great deal to warranty a rate increase. The most worrying of all is the upwards trend in unemployment which some say is a result of a huge influx of foreign cheap labour, again as a result of Gov't induced mistakes.

The housing market is booming, so you would hold rates?

to summarize: as inflation goes up, you will hold rates down?

Correct me if I'm wrong.

[Asterix]

Inflation, Unemployment, etc.

The housing market seems to be booming again, so that's one reason. Inflation is up but not by a great deal to warranty a rate increase. The most worrying of all is the upwards trend in unemployment which some say is a result of a huge influx of foreign cheap labour, again as a result of Gov't induced mistakes.

[Numptycorner]

So you would ignore inflation and hold down the rates? How long would you wait before doing something?

Would you wait until unemployment started to rise significantly (and hit business with a double whammy)?

[Asterix]

Sweeping staement

Not quite. Soros was playing the pound against other currencies, so the Bank was doing the opposite (admittedly with limited success). Gold reserves were down but not depleted as you are suggesting. More to the point, you seem to be implying that later it was Brown who sold the gold cheaply, so much for the alleged 'independence' that NewLie gave them then.