Guest 710- Registered: 28 Feb 2011
- Posts: 6,950
#1
Bank of England links interest rates to jobless target
"...The central Bank's new governor said Britain is recovering from an unprecedented financial crisis and that "a renewed recovery" is now under way. The Bank raised its growth forecasts, predicting economic growth will reach an annual rate of at least 2% by the end of 2013, a year sooner than it previously predicted.
Carney said: "There are clear signs that economic activity has strengthened this year.
"But there should be little satisfaction. Much is at stake as we seek to secure this recovery and return inflation to target."
The unemployment rate is the biggest sign that the UK still needs help, Carney said.
"Until the margin of slack within the economy has narrowed significantly, it will be appropriate to maintain the current exceptionally stimulative stance of monetary policy," the BoE said.
Concerns that the current recovery, which has seen GDP rise 0.9% in the first six months of the year, could increase inflation beyond the bank's 2% target were dismissed by Carney, although he said inflation remained a primary concern. Inflation is unlikely to rise above 3% this year - lower than previous fears of a peak of around 3.5%.
Carney said the unemployment target could be abandoned should the bank's internal analysis show GDP growth is the cause of a rise in prices of more than 2.5% in two years time..."
http://www.theguardian.com/business/2013/aug/07/bank-of-engand-links-interest-rates-jobless-target
So the BoE is tying itself to the apron strings of the Government's statistical-saccharine-suppliers.
Ignorance is bliss, bliss is happiness, I am happy...to draw your attention to the possible connectivity in the foregoing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#2
So just because there is good economic news you decide it is political.
You are wrong of course, the bank analysis ties in with many non-political forecasters differing only by the actual figures but not in the direction. By the way - I think you (or your source) means the inflation target not unemployment target.... Inflation is the only target the BoE has. woops the source is the Grauniad again - so they are likely to be the ones to get it wrong....not you.
Guest 710- Registered: 28 Feb 2011
- Posts: 6,950
#3
Ignorance is bliss, bliss is happiness, I am happy...to draw your attention to the possible connectivity in the foregoing.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#4
Yes but the BoE has an inflation target not jobs target. The word target was used in the post and that is incorrect. The new BoE governor may have decided to use jobs as a benchmark but that is not a target set for him.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#5
I have just read the yahoo link Tom provided and that bears me out - no reference to an actual jobs target. They are providing forward guidance, not unexpected and are using jobs as a benchmark not target.
Guest 710- Registered: 28 Feb 2011
- Posts: 6,950
#6
Well if pedantic we must be, then this is not about 'jobs', but the unemployment rate.
Ignorance is bliss, bliss is happiness, I am happy...to draw your attention to the possible connectivity in the foregoing.
Guest 725- Registered: 7 Oct 2011
- Posts: 1,418
#7
In a word, devaluation. This is Carney's aim. Expect a property bubble due to Osbourne's meddling in the mortgage market due to the lack of house building. Add to that no real growth to speak of unless you believe that increased GDP equals growth which, of course, it doesn't.
Take into account HS2, no airport expansion, energy crunch, restrictions on shale gas extraction, liberals intending to ban the petrol and diesel engine by 2040 - a recipe for a country in decline if there ever was one.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#8
Philip....
Forget the GDP I have already pointed out the flaws in that measurement meany times.
The PMI is a better guide as it measures real growth where it is needed and wanted, the Purchasing Managers Index. I did blog about it some days ago, I suggest you take a look. Growth is certainly returning and strengthening.
I share some of your fears about a property bubble. Once the market really gets going Osborne will have to end the scheme as another bubble is the last thing we need.
Yes - QE is about devaluation and inflation. You have justified fears there.
You exaggerate the 'green' fears you mention and we certainly do need to get the half-baked LimpDems greasy hand off the levers of power as soon as possible.
Guest 725- Registered: 7 Oct 2011
- Posts: 1,418
#9
Dunno how you can suggest that I exaggerate green fears Barry. Environmental policies are responsible for a massive increase in energy bills, food prices, transportation costs with the climate change act costing us £18 billion every year according to government figures. Consider heavy industry migrating abroad because of of increased energy costs and environmental red tape and you'll see how this is not an exaggeration.
It has to be said that it's not the liberals that we should blame but the new face of the left in Britain led by David Cameron who leads on this and other left wing policies under the guise of er, progressive conservatism.
As far as the PMI is concerned this goes up and down as regularly as clockwork and is not a true indicator of the health of the economy much in the same way that the stock market is. It's just another transient figure changing from quarter to quarter.
Apart from that I think we're in general agreement.
Guest 697- Registered: 13 Apr 2010
- Posts: 622
#10
Have to confess that I can't help thinking that all this does is stimulate more unsustainable borrowing to support a housing price bubble that puts us straight back were we started! Surely the message that should come from this whole economic situation is that we need to save more and spend less. The British obsession with property and amassing possessions through cheap credit must stop.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#11
Kevin - I agree with a lot of what you say there. People do need to save and invest more, after all I have a vested professional interest in getting people to save in a variety of ways.
But where I do part company with you is over property ownership as this something everyone should aspire to.
There is good borrowing and bad borrowing. Borrowing at a level that can be serviced to invest in a real asset like a home is a good thing. It can go wrong if you over extend yourself or keep chasing further and further up the market just to get something bigger, better and more prestigious.
What is also wrong is borrowing to cover day to day spending, building up credit card debt or for lifestyle choices like holidays. There has been far too much of the latter 'bad borrowing' which has largely been brought about because people fail to save.
We certainly do not need another housing bubble and everyone should realise that interest rates will rise within a few years and they need to be able to service their mortgage and debt when it costs a lot more than it does now. My advice to everyone is to pay down as much debt as possible now while rates are low so when they do rise the increased costs will be on a lot less borrowed capital, if any. A lot of mortgages these days are calculated on a daily basis so it is very cost effective to overpay your mortgage and even an overpayment of a few £ will help a lot and will compound up to a lot of cash saved. Incidentally - a lot of people think of mortgage costs as a matter of fees and interest rates wheras the biggest cost can be over the term, reduce the term by overpayment and you can save a lot more than remortgaging for a lower rate specially with the fees involved.
There, a bit of free generic financial advice for you....
Guest 697- Registered: 13 Apr 2010
- Posts: 622
#12
Good advice, Barry. I am very much of the saving mentality so perhaps my views are somewhat biased to that way of thinking! Very interesting programme on BBC2 last night about Germany and how they have much lower levels of personal debt than the UK largely due to the British tradition of property ownership. I agree property can be a good investment too, but as you say, it does seem to have become an insatiable appetite for property to mirror image and lifestyle irrespective of whether its affordable or not! That's why I find it quite ironic that the prudent are now being asked to pay the price through lower interest rates.
Guest 745- Registered: 27 Mar 2012
- Posts: 3,370
#13
High rents and high property prices divert money from the grater economy
And stunt growth,
Money needs to circulate in the economy.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#14
They are integral to the economy not diverting resources Keith. They are what the market says they are what we need to be careful about is distorting the market by holding down interest rates lower than they should be as happened in the early naughties. Osborne's scheme is also a distortion we need to worry about and he must not let it run too long.
Kevin - glad to hear that. A lot of people, particularly older people are suffering from low interest rates on savings not to mention the impact of QE on annuity rates. That said there has been a small increase in annuity rates recently but I do not think it is sustainable.