Bank of England raise the interest rate

[Mrblobby]

For the first time in more than 10 years the Bank of England has raised interest rates. But only from .25% to .5%

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http://www.bbc.com/news/business-41846330

[Kili01]

Yes, thats true, people are used to these incredibly low rates. But what goes down must eventually go up. For savers, its about time! Pensioners with savings have also been suffering with these abnormally low rates of interest too. Some of have been living on their diminishing savings as a result of this.
Do very low rates of interest just encourage people to take out substantially higher loans than their wages can support if interest rates go up? Has this also influenced the spike in house prices in the UK?
Dee

[Jimgward]

The problem, as Lloyd indicated, is that the economy is in a poorer state than the government will let on.... Interest rates rise and sterling drops 1.5% - the opposite of what could be expected....

A weak pound helps exports, but since we have a defect balance of payments, that actually hurts the overall economy.

Inflation has increased to a high of the past 5 years, earnings of the majority are very much down in real terms. London will suffer the most, as house prices will stall and fall and lack of employees to service the city will hinder growth.

Now, you can argue whether this is Brexit linked or not, but the fact is that we are doing worse than we were pre-Brexit vote!

[Royal]

The fact that the Bank of England is able to control inflation by raising interest rates is good news, and this small rise is a signal that slowly, slowly is the way ahead.

We could not have raised interest rates if we were in the Eurozone where interest rates are set by the ECB and currently stands at 0%. That’s the ECB rate, so commercial banks are presumably charging savers for keeping their deposits for them.

[Royal]

Raising interest rates is the traditional way in which the brake is put on inflation; nothing new or innovative there.

You missed my point (or ignored it). I didn’t say anything about being new or innovative, did I? I said that we (the UK) are ABLE to control interest rates, whereas, for example Germany the economic powerhouse of Europe cannot.

The reverse side of the coin is that if the UK had not voted to leave the EU the pound would not have weakened to the extent that it has; neither would inflation have risen as a direct consequence...and therefore there would be no need to contemplate raising interest rates as the BoE has now done

The pound was at the same level it is now back in 2012 - well before the Brexit Referendum had even been announced. I know that you just love blaming every ill on Brexit, but that doesn’t mean that you are right. Don’t bother to respond, because I somehow know what any response from you will be. Same old, same old...

[Dominic]

Sorry but to blame the current state of sterling on anything other than the referendum result and the looming Brexit is pure hokum.

This was, after all, part of the pain we would have to go through before we got the gain.

[Royal]

Sorry but to blame the current state of sterling on anything other than the referendum result and the looming Brexit is pure hokum.

This was, after all, part of the pain we would have to go through before we got the gain.

Okay Dominic.

Like HIC, you clearly know the reason for sterling’s rise and fall. It was at the same level as it is now in 2011. In 2013 it was around €1.13. It then started to rise through 2013, 2014 and peaked in 2015 at €1.42.

What caused the rise?

Hokum?

[Dominic]

Any number of things! So what?

Sorry, but you are just kidding yourself now. I can respect a leaver who acknowledges the downsides as well as the advantages, but you seem to have the blinkers on.

[Royal]

Any number of things! So what?

Sorry, but you are just kidding yourself now. I can respect a leaver who acknowledges the downsides as well as the advantages, but you seem to have the blinkers on.

And yet you can’t attribute the steady fall to “Any number of things”. It has to be Brexit, doesn’t it? Can’t be anything else can it? Even though it has been at this level a number of times before Brexit...

...and I’ve got blinkers on!

[Dominic]

You are fooling nobody but yourself.

[Royal]

Dominic.

It’s seems very easy for you and HIC to attribute the current exchange rate purely to Brexit and nothing else, but you have no idea about the reason for any other rise or fall.

I find that strange. I would have thought that anyone who could confidently state the reason for the current rate must surely have the answer to why it was high in 2015 - well before the Brexit Referendum was even announced.

[Jimgym]

Dominic.

It’s seems very easy for you and HIC to attribute the current exchange rate purely to Brexit and nothing else, but you have no idea about the reason for any other rise or fall.

I find that strange. I would have thought that anyone who could confidently state the reason for the current rate must surely have the answer to why it was high in 2015 - well before the Brexit Referendum was even announced.

I’m interested in those reasons also!

[Jimgward]

Prior to the referendum, Britain was doing well.... they had increased GDP and the pound soared..... only to fall off the cliff!

[Royal]

Prior to the referendum, Britain was doing well.... they had increased GDP and the pound soared..... only to fall off the cliff!

I do not deny that Brexit is a factor in the fall of sterling, but I maintain that it’s not the only factor, as both HIC and Dominic are asserting.

The pound has been at the same levels that it is now before Brexit and before the Referendum was announced. The high levels reached in 2014-2015 were accompanied by warnings from the IMF and City Institutions that Sterling was overvalued. An adjustment was inevitable.

The current poor FX rate is due to many factors - not just simply ‘Brexit’ as some would assert. The market dislikes uncertainty and there is too much of that in the UK at present. We have a weak, minority government. The negotiations are not going well. The Tory Party is split between Hard and Sof Brexit. The country is divided into Leave and Remain camps. Fake news abounds. The list of uncertainties is endless.

The value of the pound has been driven by politics rather than economics over the last year. All our economic data during the severe falls of 2016 were good and none of the dire predictions of the Remain Camp came true.

[Dominic]

What causes the uncertainty? Brexit.
Why is there a weak government? Brexit.

[Royal]

What causes the uncertainty? Brexit.
Why is there a weak government? Brexit.

Why is the sky blue? Brexit.

[Dominic]

So are you seriously trying to claim that the uncertainty is not caused by Brexit? If that is the case then discussing the subject with you is impossible. It is like trying to discuss something with somebody who has their fingers in their ears and is shouting "La La La I'm not listening".

[Royal]

I am seriously trying to assert that the uncertainty is not ALL down to Brexit nor, indeed, is the current poor FX rate. If it was, then how do we class the highest UK employment rate for 42 years? Is that due to Brexit too?

Brexit hasn’t even happened yet. It will happen in March 2019 and within 2 years of that date, one side or the other will be vindicated. Not before. We had a General Election in June 2017 and a weakened Conservative minority government ‘won’ How, pray, is that due to Brexit? If a Labour government were to have won, how would that have been down to Brexit? Would the markets rise, do you think, if Jeremy Corbyn were in power? Would that be down to Brexit?

Back in January, Theresa May gave a speech indicating ‘Hard Brexit’ by saying that “No deal would be better than a bad deal. Sterling immediately rose. Why? Because AT THAT TIME a certain amount of uncertainty had been removed.

The current in-fighting between Tory Ministers in Cabinet (and a weak PM unable to control them), the ever-changing policies of the Official Opposition on Brexit nad just about everything else, the arrogance of the Old Guard, the elitist class and the self styled intellectuals and the total intransigence of the EU is causing the uncertainty. Not Brexit per se.

[ApusApus]

Exchange rates fluctuate constantly & for a variety of reasons ................ Brexit is merely one of those reasons & an easy one to blame!


Shane

[kingfisher]

Hudswell- you ask why the ECB is pumping “literally millions” into the eurozone economy. It is actually millions of millions- 2,300,000,000,000 euros, or 2.3 trillion since March 2015, and set to continue for at least another year.
The answer to your question is that Mario Draghi famously said “he would do anything it takes” to save the euro and the eurozone from collapse. So he’s printed lots of money backed by government debt, much of it junk. The problem is that he has almost reached the legal limit of one third of the eurozone states’ debt, and there’s not much more left. Knowing how the EU operates, I would not be surprised if they simply up the “issuer limit” to a half or two-thirds of issuer debt when that day arrives.
….And continue to do “whatever it takes”.
But let’s not bother with details. The eurozone is booming. Smoke and mirrors come to mind…