Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#1
The Bank of England have announced its decision for further QE increasing money supply by a further £75bn.
Some experts think that in all another £300bn will be added to the total.
I am not convinced that this is the right thing to do. The first round of QE seems not to have had any significant effect on boosting the economy but it is certainly helping boost inflation. We can certainly expect a lot more inflation hitting the economy as a result of this decision in the next 18-24 months. We are already expecting it to top 5% by the end of this year.
In addition gilt yields and borrowing rates being held down so low so long is one of the factors that contributed to the mess we are in.
More inflation is bad news for our long term borrowing rates. True there has been some talk, ludicrous as it is, about reducing the bank base rate to 0.25%. The problem is that all this feeds through into inflation we will all end up paying for it and it will do long term competitive damage to the economy.
This is very worrying.
On a personal level I would urge people to clear down debt as much as they can while the going is good. Get rid of your credit cards and overpay on mortgages (make sure that are daily or monthly interest calculations for this), also stop borrowing more money and build up some cash reserves for emergencies. Prepare for the worse, a significant increase in interest rates to control domestic inflation.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#2
i don't really see the benefits of this move, surely if inflation and interest rates rise then the pound gets stronger hitting our exports?
the only people that could benefit would be those with a lot of money saved, even then inflation would knock that back.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#3
Howard - interest rates will have to rise soon anyway because of high inflation and this means they will have to rise further and stay higher longer.
The pound will rise when interest rates increase but remember our rates are really too low now and are only at this level because of a weak economy. Exports would be hit but imports, including raw materials will fall including oil which is priced in dollars. It is very much swings and roundabouts.
People with a lot of money saved, if its in cash deposit accounts, have been getting a poor deal for a long time so let us not begrudge them that. Inflation has been exceeding cash returns for a long time now so their savings, if in cash, are being hit anyway.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#4
Jan Higgins
- Location: Dover
- Registered: 5 Jul 2010
- Posts: 13,931
#5
I wish the media would stop all the doom and gloom financial scaremongering.
Wait until it happens then report it but stop speculating on something that might never happen, it actually stops some from spending which does the wider economy no good.
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I try to be neutral and polite but it is hard and getting even more difficult at times.
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Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
#6
looking at the heading of this thread,i thought the queen had died and was starting a 10 day period of mourning.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#7
You have a good point there Jan.
#8
I thought it was cruise liner arriving
Guest 705- Registered: 23 Sep 2010
- Posts: 661
#9
I thought that was how it worked anyway Barry-somebody panics,it escalates and it all comes down around our ears.
Never give up...