Comments: Shadow MPC signals no change in rates

Wasn't this supposed to be the month which had been hyped up previously for there being a rate cut ?

It hasn't happened.

It will be interesting to see the minutes in a few weeks, which I think will prepare the ground more for Interest Rate rises than cuts.

But, as always, the media will be in denial about any hint of rises in interest rates, and much more likely to keep the flame of lower interest rates alive.

Posted by Warwickshire Lad at November 10, 2005 12:47 PM

David, is it necessary for the UK to have higher Interest Rates than the US, as I believe has traditionally been the case ?
If so, what is the upshot from the current 'closeness' and the likelihood of further US rises ?

Posted by assetpriceinflation at November 11, 2005 05:01 PM

It is unusual for the policy target rate in the US (Fed Funds) to be higher than in the UK (the Bank of England's repo) rate, although more common for commercial lending rates to be higher. US prime rate, for example, is already 7%. Sometimes when the US target rate has been higher than the UK sterling has been strong, as in the early 1980s, sometimes it has been weak - 2000-2001.

The markest are discounting a rise in US rates above those in the UK next year. To me this is perfectly logical. America has faster growth and higher inflation than we have. Similarly, Europe's weak growth means lower rates than in the UK or US.

Posted by David Smith at November 12, 2005 10:30 AM