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#1
http://www.bloomberg.com/news/articles/2...ng-debtors

U.K. Braces for Rate Increase Never Experienced by Young Debtors
by Jill Ward
August 3, 2015 — 7:01 AM SGT Updated on August 3, 2015 — 7:08 PM SGT


After more than six years of record-low interest rates, the looming increase hinted at by Bank of England policy makers may come as a shock to consumers driving Britain’s recovery.
As Governor Mark Carney signals that rates could rise early next year, officials are weighing the potential costs for the fastest-growing economy in the Group of Seven. A risk is that highly indebted households curtail their spending, putting the brakes on an expansion getting no help from exports.
“There’s a general level of uncertainty, given that we’ve not had a rate increase for so long”
For many people under the age of 30, the increase will be the first of their working lives. The BOE has held its benchmark at 0.5 percent since March 2009, helping to fuel a housing boom that has left Britons owing a record 1.5 trillion pounds ($2.3 trillion). The key rate averaged 4.5 percent in the preceding six years.

“I would expect the economy to be more sensitive to a 25 basis-point rise than in the past, since the level of household debt in the economy is still relatively high,” said David Tinsley, an economist at UBS Group AG in London. “There’s a segment of the household sector whose perceptions of a normal rate of interest is conditioned to be very low.”
One such person is Naomi Scott-Mearns, a 23-year-old environmental consultant who is saving to buy a home in London.
‘Real Concern’
“I think rates will rise within the next few years,” she said. “It is a real concern for people having to consider an interest-rate rise. I think some people will have to scale back spending.”
At more than 140 percent of income, the debt burden of British households is higher than in the U.S., Germany and France, and government forecasters see it rising to almost 170 percent by 2020. BOE financial-stability officials estimate about 5 percent of households have debts equal to four times their income or more.
A rate increase would immediately push up the cost of variable-rate mortgages, which account for almost 60 percent of outstanding homes loans. The preference for fixed-rate loans in recent years may offer little respite as many are on short terms, according to Societe Generale SA economist Brian Hilliard.
While most personal indebtedness is made up of mortgages, unsecured debt such as credit-card borrowing is growing at about 8 percent annually and on course to reach 10,000 pounds per household by the end of 2016. Total debt costs would rise by 1,000 pounds a year if interest rates increase by 2 percentage points, Pricewaterhouse Coopers estimated in a report in March.
BOE Action
The dangers are not lost on the BOE, which took action last year to stop people taking on debt they may eventually struggle to afford. Carney insists rates will go up gradually and peak below pre-crisis levels. Money markets are barely pricing in a benchmark rate of 1 percent by September next year.
For some economists, the longer the BOE delays, the bigger the shock will be to households when policy is tightened
For some economists, the longer the BOE delays, the bigger the shock will be to households when policy is tightened Simon Dawson/Bloomberg
The nine-member Monetary Policy Committee is meeting this week against a backdrop of a firming labor market and the longest stretch of continuous economic expansion since before the financial crisis. That could lead a minority to vote for an interest-rate increase.
“We look for three MPC members to have voted for a 25 basis-point hike this time, ahead of an eventual November hike as momentum in wage growth continues,” said Sue Trinh, a currency strategist at RBC Capital Markets.
Rising living standards could help insulate consumers from rate increases. Wage growth accelerated at the fastest pace in more than five years in May, while inflation is zero.
Debt Burden
“Borrowers that are up-to-date on their payments will be able to adjust their discretionary spending if incremental rate rises are spread out over the next three years,” said Emily Rombeau, an analyst at Moody’s Investors Service.
Britain’s reliance on the willingness of consumers to keep spending was underscored by a survey Monday showing that manufacturing remained all but stagnant in July as export demand fell for a fourth month.
For now, the burden of personal debt remains manageable as lenders compete for market share by cutting rates to all-time lows. First-time buyers are losing just over a third of their take-home pay to mortgage payments, compared with more than a half when the BOE last raised interest rates, to 5.75 percent, in July 2007, according to Nationwide Building Society.
For some economists, the longer the BOE delays, the bigger the shock will be when policy is tightened.
“A rate rise should be relatively prompt, and relatively steady,” said Philip Shaw, an economist at Investec Securities in London. “There’s a general level of uncertainty, given that we’ve not had a rate increase for so long.”
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#2
OPINION Aug 16 2015 at 12:24 PM Updated Aug 16 2015 at 5:27 PM

Low interest rates have served their day, now they're causing problems of their own

Central banks have a difficult balancing act to manage. Low rates have been needed to stimulate economies, but now low rates have their own problems. Reuters
by Jonathan Eley
Can you remember life before the iPhone? The "revolutionary and magical" product first went on sale in July 2007. It seems a long time ago now; after all, we've had two Olympic Games since then. But that month was significant for another reason: it was the last time that the Bank of England base rate went up.

I think we are very close to the time when it should rise again. I know there are lots of good reasons to be cautious about this.

Central banks elsewhere in Europe, especially Scandinavia, rushed to raise rates only then to cut them again. Sweden, which cut in 2011, now has negative official interest rates (and a growing property bubble). Here in the UK, economic growth is uneven to say the least; just this week, data showed that unemployment rose in June and the pace of wage growth slowed.

Many major economies, including our own, remain perilously close to deflation, at least in consumer price terms (though asset prices are another matter altogether). China's decision this week to devalue its currency will export more price deflation to indebted consuming countries such as the UK.

There is a school of thought that says it is far easier to deal with the problems that low interest rates cause than it is to recover from the mistake of raising rates too soon and tipping an economy into deflation.

Higher interest rates will also increase costs: for homeowners with mortgages, for consumers with personal debt, for businesses and indirectly for the government, which must find tens of billions each year to pay the coupons on the UK's sovereign bonds. They will also strengthen the pound - bad for exporters.

But everything is relative. A bank rate of, say, 0.75 per cent would still be extraordinarily low by historic standards. Martin Weale, a member of the Monetary Policy Committee, has opined that there can be few businesses in the UK that are viable with rates at 0.5 per cent but would struggle with them at 0.75 per cent.

DISTORTING CONSEQUENCES

Furthermore, low deposit interest rates distort behaviour. They have forced savers to become investors. Those who might once have been content to leave some or all of their money in a bank or building society account have been pushed into higher-risk activities - from bond and equity funds, to peer-to-peer lending and crowdfunding, to "minibonds", to buy-to-let property.

So far, that has had few unpleasant consequences because the prices of most assets have risen, driven by investors chasing higher returns than they can get on savings (Apple shares are up more than 500 per cent since July 2007, by the way). But the good times will not last for ever - and as Maike Currie pointed out in FT Money last week, a lot of the investments being marketed to yield-chasers carry significant liquidity risk. You can get your money out of a savings account any time you like. It will take you months to sell a property.

The authorities have tried to mitigate the worst side effects of low interest rates - by limiting high-risk mortgages, creating schemes to help first-time buyers with the high cost of housing and launching savings products for yield-starved older savers. Yet, however well-intentioned these initiatives may be, they just add another layer of distortion to what should be free markets.

Another aim of ultra-low interest rates (and quantitative easing) was to stave off a freezing-up of the financial system. That objective has been achieved. They were also intended to encourage long-term investment. Here, the evidence is less clear. A lot of companies, especially in the US, have merely taken on very cheap debt - they can offset the interest against tax anyway - using it to buy back their own shares. Financial engineering has taken precedence over investment.

HISTORY MOVES ON

Finally, there is the behavioural finance angle. Humans have a natural tendency to ascribe more importance to things that have happened recently than to events in the dim and distant past. So the longer that near-zero interest rates continue, the more that becomes the norm. A senior manager at an investment bank was quoted this week as saying that many of the younger recruits on his trading floor have not seen an interest rate rise in their adult lives.

Back in 2009, when the interbank lending system was on the verge of freezing up, it was entirely appropriate for central banks around the world to send out the message that they stood squarely behind the financial system. Six years later and central banker phrases such as "whatever it takes" and "as long as necessary" are increasingly taken to mean that rates will stay very low indefinitely in order to backstop financial markets. In the late 1990s, this was termed "the Greenspan put", after the then-chairman of the US central bank. These days, "moral hazard" might be a better description.

The Federal Reserve is likely to raise its benchmark lending rate (for the first time since 2006) this year - possibly next month. It will be the most-telegraphed, most talked-about rate rise in history. That event will give the UK's central bankers the air cover they need to start the gradual process of restoring normal monetary policy in the UK. They should take the plunge.

Financial Times
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#3
Stagflation coming for UK? 

UK inflation rate leaps to 2.3%
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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#4
Sounds like things are starting to fall apart post Brexit....

Road to ruin? Carillion collapse puts spotlight on UK outsourcing model
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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#5
2019.03.09【文茜世界周報】英國追查政治獻金 莫斯科黑手隱然若現
https://www.youtube.com/watch?v=9JvPYvEL...AU&index=7
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#6
Service sector shock sparks downturn fears
https://www.bbc.com/news/business-47800459
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#7
Brexit: Tears and Auld Lang Syne as MEPs back terms
https://www.bbc.com/news/av/51302591/bre...back-terms
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#8
八点最热报 14/03/2020 轻微症状无需求医 英国"疯狂"抗疫策略引争议
https://www.youtube.com/watch?v=39kuCQYUNBc


八点最热报 15/03/2020 英国“放任感染”的策略是拿人命开玩笑?
https://www.youtube.com/watch?v=WrsUxoLBADM
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#9
The Bank now expects headline inflation to peak at 13.3% in October and to remain at elevated levels throughout much of 2023, before falling to its 2% target in 2025.


The MPC now projects that the U.K. will enter recession from the fourth quarter of 2022, and that the recession will last five quarters as real household post-tax income falls sharply in 2022 and 2023 and consumption begins to contract.

Bank of England launches biggest interest rate hike in 27 years, predicts lengthy recession
https://www.cnbc.com/2022/08/04/bank-of-...years.html
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#10
(04-08-2022, 08:28 PM)Behappyalways Wrote: The Bank now expects headline inflation to peak at 13.3% in October and to remain at elevated levels throughout much of 2023, before falling to its 2% target in 2025.


The MPC now projects that the U.K. will enter recession from the fourth quarter of 2022, and that the recession will last five quarters as real household post-tax income falls sharply in 2022 and 2023 and consumption begins to contract.

Bank of England launches biggest interest rate hike in 27 years, predicts lengthy recession
https://www.cnbc.com/2022/08/04/bank-of-...years.html

at least they are getting ahead of inflation and measuring it properly. UK M2 money supply has only increase around 20% from precovid ~2.5T to ~3T post covid (past 2 years) so they should have inflation around 10% each year going forward will end2023/2024 if they dont print too much in the coming year. Their >10% inflation figure is likely compounded by external inflation as they are a net importer of energy.
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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