And Still They Go On
Against all odds, the various corners of the press continue to come out of the woodwork with various comments and views on the 0.25% rate rise. Surely this is old news by now? A week after his deputy suggested that the bank’s rate rises could continue further than expected, and are designed to shock the markets, David Smith (economics editor of the Murdoch-owned Times newspaper) has come out with soothing comforting talk that rates will never go over 5%. Incidentally this is the same David Smith who has been predicting for the past year that the next move in interest rates will definitely definitely be down, so it’s probably best to take his predictions of a 5% absolute cap with a pinch of salt. Elsewhere, the Independent takes a more precautionary and sensible approach, warning borrowers that the August rise will probably not be the last, given the recent rumblings from Mervyn and Co. Interestingly they point out that a 0.25% rise is not the only option available to the Bank, something many commentators appear to have forgotten recently.
Roger Bootle in the Telegraph suggests that the US economy is in for a tough 2007, due to the US housing market (the “leading support for consumer spending”) hitting the rocks, but of course the same situation replicated over here would not apply to Britain in the same way would it? Apparently a couple more interest rate rises could see Britain following the US where housing is concerned, but I’m sure Gordon must have thought of this.
The Sunday Herald add an interesting wrinkle to the whole interest rates debate by correctly pointing out that around half of consumer and business debt is actually lent out on a fixed-rate deal basis at the moment. Presumably this means that the Bank will need to raise IR even higher before it starts to have the desired effect? The Telegraph asks numerous “city experts” to comment on whether interest rates have peaked at 4.75% and comes to the conclusion that they almost definitely have not.
Perhaps most surprisingly of all, the BBC have reported today that even though CPI has just fallen by 0.1 whole percent, to 2.4%, this may not save us from more IR rises. Shocking really, as the BBC would usually use such news to persuade us all into thinking that rates must be about to go down again!
On a separate issue, Channel 4’s Dispatches programme have shown themselves to once again be the true masters of stating the bleeding obvious by revealing that apparently the various Private Finance Initiative projects that have been dreamt up by Brown and Blair since 1997 have all been huge rip-offs and terrible value for the taxpayer. Given that the Government effectively has the ability to borrow as much money as it likes at the lowest interest rates known to man, it seems flabbergasting that so much of the running of the country has been handed over to the private sector, at many many times the overall cost as in the pre PFI days. Brown’s famous promise that he would “only borrow to invest over the economic cycle”, despite a couple of tweaks by redefining the length of said cycle, redefining the definition of “invest” and the definition of “borrow”, would still be met even if the PFI deals had been done entirely within the public sector, as surely these works would have come under the “invest” column. Then again, borrowing all the extra money may have rung alarm bells in some areas, and the Government already obviously need plenty of it to pay for all their wars etc. Once Brown and Blair dream up the idea of using PFI to pay for wars, then maybe they will really be onto something.
On a lighter note, aside from all the doom and gloom of impending rate rises that is floating around at the moment, the Telegraph gives us a fascinating glimpse into the psyche and inner frustrations of the Iron Chancellor by revealing that he has decorated the treasury with, amongst other paintings, Graham Sutherland’s “Expulsion and Killing of an Enemy”. Something for Tony to ponder, perhaps?
