The rate debate heats up

Article Abstract:

United Kingdom inflation could drop further as a result of the high value of pound sterling, and may even drop to 1.5%, if mortgage rates are excluded, which is below the target set by the government. Interest rates may still be raised since they take some two years to have an impact, and inflation may rise as economic growth accelerates in 2000. Inflationary pressure could come from wage inflation and a drop in the value of pound sterling. Other analysts see high investment levels as keeping inflation low, and inflation expectations as having dropped, so interest rates may not be raised.

Prices

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No danger

Article Abstract:

High stock prices are not likely to boost consumption so push up inflation in the United Kingdom, because few households own stocks, argues HSBC Markets. An increase in house prices may push up spending, so inflation, but asset price inflation is often preceded by stronger consumer spending rather than causing it. Stocks tend to be held by wealthier people who spend a lower proportion of their income, so are less likely to contrinute to inflation, but the Bank of England is still concerned about stock prices and may take some time to lower interest rates.

Securities and Commodity Exchanges, Security and commodity exchanges, Securities Exchanges, Stock-exchange, Stock exchanges, Exchanges

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The bank's fine monetary judgement

Article Abstract:

There have been calls for rises in United Kingdom interest rates due to concern over inflationary pressures, but these pressures may not be as serious as is feared. Retailers have tended to keep prices low, despite rising sales, and much of the gain form windfalls could have been spent. Increased money stock could be largely accounted for by institutions not likely to buy goods and services. Productivity has risen which helps offset wage rises, and the high value of pound sterling may help keep inflation low.

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