Live by the sword

[Workingman]

Reuters is reporting that the BoE might have to raise rates higher and sooner due to wage increases.

The increases in the pipeline are coming in at 3.1% and the minimum wage will increase by 4.4% for most and over 5% for younger workers in April. There are millions of us on minimum wage and the extra £ in our pockets will create inflationary pressure. The BoE will have to act. Any bets on the size of the rate increase?

[Suff]

I'm leaning towards 0.25 In March and May, followed by a reading of the stats at the next meeting.

Could be wrong but it's looking very much like the BOE has lost control of it. In that case they will have to push constantly and the decision to not have a meeting every month, any more, means they have trapped themselves into taking action whether they like it or not.

The markets had already priced in a rise in May. So if the BOE wants to shake things up they have to go with March, it is their only opportunity to head it off. If they don't, then we could see a 0.5 raise in May. Some analysts are starting to think the BOE will go for 3 rounds of tightening in 2018 instead of 1 in May. We'll see what they say in March though.

Because of the split nature of the MPC it is quite difficult to second guess them. The only thing they tend to be unanimous about is doing nothing...

[Workingman]

What is this fixation with 0.25% or 0.5%? What is wrong with 0.1% or 0.35% etc, it is not as if modern computers find it difficult to work with such 'stange' figures? I also thought that the original idea of the monthly meeting was so that the BoE could micro-manage or react almost immediately to shocks to the system.

I'll go for three 0.25" rises in March, May/June and in the autumn, unless things change.

[Suff]

Yep I have no idea what the fixation with 0.25 is. It seems that the world financial markets have decided that 0.25 is measured, 0.5 is shock and 1.0 is panic. Nobody seems to believe that 0.1 is worth doing.

The monthly meetings were supposed to be to micro manage developing situations. Except they seemed to believe there were no "situations" left to deal with and decided to cut the meetings. Just before the Brexit vote. Oops....