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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Sat Apr 21, 2007 5:35 am Post subject: British Pound Finally Awakens to Inflation feeding Rising UK |
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British Pound Finally Awakens to Inflation feeding Rising UK Interest Rates
Inflation as measured by the CPI jumped above 3% to 3.1%, which now virtually guarantees a hike in UK interest rates to 5.5% at Mays Bank of England MPC Meeting. The British Pound surged through the $2.00 barrier, having flirted with it for nearly 2 years now, each attempt at a break having held, but no more !
Both the rise to 5.50% at the May meeting and the Pounds jump above $2.00 have been long forecast and expected.
The Story of 2007 has been and will continue to be of higher interest rates across the world. Not just for the UK but for most major economies. The resulting effect is already being seen in the currency markets with a selling of the US dollar especially against the Euro and Sterling.
The Target for UK interest rates, set way back on 7th November 2006, is for UK interest rates to hit 5.75% this year, (UK Interest Rates could rise to 5.75% in 2007) . The time line for this is a rise to 5.5% in May, with the following rise to 5.75% scheduled for August / Sept 07.
The underlining reason for this remains the surging money supply, relative strength of the UK housing market and economy which continues to force inflation ever higher. This was expanded upon in the article of 26th Dec 06 UK Interest Rate forecast for 2007 - Bank of England to do battle with inflation ,
The rise to 5.50% for May 07, was reinforced in March 07, with the failure of the subprime mortgage fallout to impact on the UK housing market, and expectations of the UK housing market gathering strength as it moved into the traditionally strong summer demand period. UK strong house price growth signals further rises in interest rates
UK interest rates in real terms remain at historic lows. We have the CPI index (the fake inflation indices) at 3.1%, which despite being manipulated has nudged above its upper band of 3%, which basically automatically calls for a rise in UK interest rates. The closest thing the UK has to an accurate measure of inflation is the RPI index , this index is the one people actually pay attention to with regards all aspects of the UK economy, from pay deals to indexation of government bonds to increases in social benefit payments. The CPI is by and large ignored by the 'real' economy.
http://www.marketoracle.co.uk/Article784.html |
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