Right warning, wrong reasoning

Article Abstract:

The Bank of England is concerned that UK inflation could be boosted by strong consumer demand and argues that interest rates should not be reduced because of this threat. An increase in demand may not necessarily lead to higher inflation levels, however, since rising costs tend to cause firms to push up prices, rather than an increase in demand. Labor costs depend on a wide range of factors including bargaining power. Raw material prices may rise due to international factors and these could push up inflation.

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US dollar: D-Mark doubts

Article Abstract:

The Bundesbank would like to see the German mark weaken since this would help German economic recovery and provide favorable conditions for European monetary union (Emu). The German mark has weakened against the US dollar but its fall has been limited by the high level of German bond yields in relation to US yields and lower German inflation, which gives a 1% higher real interest rate for Germany. The Bundesbank could reduce German interest rates from a level which is already low in Dec 1996.

Economic aspects, Germany, Dollar (United States), Deutsche Bundesbank, Mark (Germany)

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Split decision

Article Abstract:

The Monetary Policy Committee of the Bank of England was divided on whether to raise interest rates in Mar 1998, with four votes in favor of raising rates and four against. This was the same division as in Feb 1998, and the governor of the bank, Eddie George, used a casting vote in favor of keeping rates unchanged. There is uncertainty over whether rates have peaked, with fears of wage pressures pushing up inflation on the one hand, and of the high value of pound sterling on the other.

Interest Rates

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