Comments: Staying at 5.5%

Hi

Well I would expect at least 2 votes for a hike. What interest me though, is is they were going to raise rates before the next inflation report, I would have thought they would have done it today. Maybe I'm guessing, but perhaps the inflation number is fairly weak, so they chose not to?

Posted by kingofnowhereiii at June 7, 2007 12:32 PM

The next inflation report isn't out until August. If you mean the monthly CPI figure which comes out next week, the MPC have always claimed that they look at inflation several months out, although the current CPI does factor into their thinking and they did have advance warning of it this time (they don't every month, which seems a bit bizarre). I expect it will have fallen by a couple of tenths, but the MPC will really be thinking about what it is likely to be in 3, 6, 9 months time.

Posted by Minh at June 7, 2007 12:40 PM

Hi

I know they "say" they ignore the current inflation number. But then if that was true, why would they need to get a sneak preview. It therefore obviously has some bearing, whatever they say.

As regards inflation outlook, they tend to look two years in advance, which is the time interest rate changes now take to fully work into the figures.

If they were only looking at 3-9months out, then IMHO inflation will be on target (above some months and below others

With regards to the next inflation number, I would go for 2.4% if I was a gambling man.

Posted by kingofnowhere at June 7, 2007 01:39 PM

They haven't a clue what they are doing, if they did CPI would never have been over the 2% target for a year!! Their assumptions that oil would fall was foolish.

Posted by Kev M at June 8, 2007 12:14 PM

That's not quite right. Although the inflation forecast was wrong, it wasn't because the Bank took a view on oil. It always assumes oil prices will move in line with the futures curve, which wasn't signalling big price falls.

Posted by David Smith at June 8, 2007 03:10 PM

The caution exercised by the MPC will have consequences related to the sterling. The sterling will plummet given the slow pace of increases, giving way to import related inflationary pressure in the medium term.

Retail sales do not look up and any fall in dollar and/or pound will figure in the services sector and lead to major alignment in the value of the sterling, which the MPC does worry about from time to time.

Posted by H.Damani at June 9, 2007 05:16 PM

The caution exercised by the MPC will have consequences related to the sterling. The sterling will plummet given the slow pace of increases, giving way to import related inflationary pressure in the medium term.

Retail sales do not look up and any fall in dollar and/or pound will figure in the services sector and lead to major alignment in the value of the sterling, which the MPC does worry about from time to time.

Posted by H.Damani at June 9, 2007 05:17 PM
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