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Thread: Interest rate drivers

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    Site Caretaker Dave A's Avatar
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    Interest rate drivers

    Perhaps more than shifts in sentiment and the sub-prime crisis, inflation is probably the ultimate interest rate driver. The question is whether the current inflation run is temporary or becoming imbedded.
    Britain's top share index tumbled 2,7% to hit its lowest closing level in nearly three years, as concerns deepened that continuing oil price rises could make high inflation a permanent fixture. The FTSE 100 marked an eighth consecutive week in retreat.

    Richard Batty, global strategist at Standard Life Investments, said: "If inflation is cyclical, then it allows the Bank of England to consider cutting rates ahead of an expected drop over the next two years. But if inflation looks like becoming structural, then that is a worry. The Bank of England won't be able to cut rates, workers will ask for higher wage rises, and the situation will deteriorate."
    from an M&G story on the continued sub-prime crisis here
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    Silver Member Graeme's Avatar
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    I often feel that it is easy credit which causes inflation - if credit was harder to get we wouldn't have seen the sub-prime crisis and we wouldn't have seen the demand for goods exceeding their supply. Banks need to have their wings clipped - if people had to save up to buy something instead of buy now and pay later countries would have large capital resources and more goods would be available to meet demand.

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