Most people in Britain must be looking forward to their holidays even more
than usual this year. It has been a thoroughly miserable summer – and for
many families, the weather has not been the only reason to dream of “getting
away from it all”.
In the past 12 months, the single biggest item in almost every family budget –
the cost of the mortgage – has increased more sharply than at any time in
the past ten years. For every £100,000 borrowed – and the average new
mortgage is now £126,500 – the interest costs have increased by £104
monthly. Meanwhile, the family earnings of £33,000 – which typically support
every £100,000 borrowed – have grown by less than £20 per month, once
increasing retail prices, unrelated to mortgage costs, are taken into
account.
To put the point more directly, almost everybody in Britain is now
substantially worse off than a year ago. In fact, the decline in real
earnings, after taking account of inflation, mortgage costs and taxes, has
been greater than at any time since the deep recession of the early 1990s.
And most financial experts believe that the worst is still to come.
After the higher than expected inflation figures that were published on
Tuesday, most City analysts believe that another increase, from 5.75 to 6
per cent, is now absolutely certain – and to judge by the recent trading in
financial markets, further rate rises early in 2008 are more probable than
not. To make matters worse, the big gains in property prices that have
boosted homeowners’ wealth and thereby compensated for dwindling real
incomes are probably a thing of the past. Average house prices outside
London stopped rising last month, according to the Halifax index. And with
interest rates marching ever upwards, they could soon start falling, at
least for a while. Thus the normal recourse of the hard-pressed British
family – to borrow recklessly against their valuable property assets – will
look much less tempting in the coming months as house prices stagnate or
fall.
That was the bad news. Now for something more optimistic. Most of what you
read in the paragraph above should be taken with a large pinch of salt.
Despite what you hear from City analysts and read in sensational newspaper
headlines, there is nothing certain about another increase in interest
rates. While it is true that incomes have recently fallen in real terms, the
average British family is still far better off than it was a year ago
because of the increase in its property, pensions and stock market wealth –
and this favourable wealth effect will allow most people to keep borrowing
to maintain their spending patterns, despite the squeeze on their real
incomes. That, in fact, is how so many apparently hard-up families will be
able to afford their foreign holidays this year, despite their declining
real incomes and rising mortgage costs.
But doesn’t this mean their borrowing is reckless and imprudent? Not
necessarily, even if we assume house prices stabilise or modestly decline in
the year ahead, as suggested above. Most homeowners in Britain still enjoy a
very comfortable cushion of equity in their property values and as long as
this is the case they will be perfectly rational to borrow, in moderation,
to go on holiday or buy a car or offset a temporary decline in real income.
Only if interest rates keep rising or if house prices fall sharply, instead
of just moving sideways, will the present pattern of borrowing in Britain
become a cause for regret.
But isn’t the pincer movement of rising interest rates and falling house
prices exactly the disaster that awaits the average British family when they
return from their expensive holiday abroad? I don’t think so. In fact, I
believe that the peak in interest rates may have been reached already,
despite the strong consensus in the City which expects them to rise to 6 or
6.25 per cent. As for house prices, these may well decline slightly, but if
I am right in assuming that interest rates will stabilise at or near current
levels, a modest decline in house prices will do no serious damage to
personal finances and wealth.
There are several reasons for this reassuring outlook – especially the recent
extreme strength of the pound, which will squeeze large parts of the British
economy and counteract a lot of the recent inflationary pressure – but the
main reason for believing that interest rates will not rise much further is
simple. The Bank of England disagrees with the City consensus about the
inevitability of higher interest rates. How do I know this? Because the
members of the Bank’s Monetary Policy Committee, who actually takes the
decisions, keep saying so.
Mervyn King, the Governor of the Bank, has repeated time and again that the
MPC never decides in advance on a strategy of raising interest rates in
future months. Unlike the European Central Bank and the US Federal Reserve
Board, the Bank of England genuinely decides on its monetary policy one
month at a time. If the MPC really believed that interest rates inevitably
had to be increased, they would have done this already. Or, at the very
least, some of the members of the MPC would already have started arguing for
a bigger increase in interest rates.
Yesterday morning, however, we learnt that the MPC was in fact debating the
opposite course. Instead of voting unanimously in favour of last month’s
rate increase to 5.75 per cent or arguing that interest rates need to rise
to 6 per cent or even higher, three MPC members maintained that rates should
remain at 5.5 per cent. That two of the three MPC dissenters were senior
members of the Bank of England’s staff – Charles Bean, its chief economist,
and Rachel Lomax, the deputy governor in charge of monetary analysis and
research – strongly suggests that Bank’s own analysis puts the appropriate
level of interest rates for the British economy today nearer 5.5 per cent
than 5.75 per cent and certainly not higher.
This view may turn out to be wrong – I for one have argued that interest rates
might need to rise to 6 per cent (although that was before the recent
upsurge of sterling). But it is unlikely that the Bank will suddenly decide
that its analysis was wrong by a very wide margin. The chances are,
therefore, that interest rates in Britain are now at, or very near, their
peak for the present cycle. So enjoy your holiday, even if you are
travelling on borrowed money: you are unlikely to face bankruptcy when you
return.
"Most homeowners in Britain still enjoy a very comfortable cushion of equity in their property values and as long as this is the case they will be perfectly rational to borrow, in moderation, to go on holiday or buy a car or offset a temporary decline in real income. Only if interest rates keep rising or if house prices fall sharply, instead of just moving sideways, will the present pattern of borrowing in Britain become a cause for regret."
What about those who cannot meet their monthly mortage?
Let me guess. Written by Lewis Carroll, right?
M Levine, NY USA,
I agree Mr Kaletsky should declare any interests here. This article sounds like it is pure spin to keep the credit bubble inflated. Does Mr Kaletsky get paid by companies that would have a lot to lose if the credit bubble deflates? Spin like this never works for ever. Eventually people see the Emperor has no clothes.
Anthony, London,
I read recently that savers outnumber borrowers by 7 to 1, I don't know whether this is true or not, but rate rises are not bad news for everyone. Anything to stop the housing monster from pricing out the next generation has to be a good thing.
Simon, Chester,
Traditionally UK interest rates have been 1.5% higher than the US which would suggest about 7%. In addition since in the post war years the average interest rate in the UK has been about 7.5%, for anyone who thinks that interest rates are high now it's worth looking at http://www.bankofengland.co.uk/statistics/rates/baserate.pdf to claim the China effect is some sort of new paradigm is madness, particularly in a country that became rich from an empire that worked in exactly that way. Wages are rising in China and in the medium term it is likely that the sterling, currently overvalued will drop against the dollar, increasing the costs of imports and inflation.
So Anatole, I suggest the only way is up. If you are going on holiday you might find the Isle of Wight more suitable than the Maldives. You never know what lies around the corner!
Mike H, Derby, Derbyshire
I'm a 22 year old none degree educated person.
I have all three.
A shares ISA.
A pension split between property and recovery fund.
And a house.
I dont have a house in London, but I have a house.
Dominic, Manchester, UK
But borrowed money still has to be paid back, and if your real income is falling, you arent going to be able to do that.
Dominic, Manchester, UK
The message appears to be as long as consumers keep borrwowing against their illusory wealth there is no problem.
What about some anlaysis of the real economic issues. Sub prime crisis, seasons why the pound is strong (mainly speculation), world imbalance of trade, global credit tightening, pressure on global prices (oil and food), low productivity in the Uk economy.
No just as long as house prices stabilise we can keep borrowing to infinity!
david barker, maidstone,
One factor which will need ot be taken into account sooner or later is the predicted rise in the price of basic foods due to appalling harvest in many countries, as well as the diversion of land from food production to bio-fuels. Food security is going to be realised as being more and more important in any case, as the historic rise in agricultural production is increasingly overtaken by the rise in world population.
It is high time that "market economists" woke up to reality!
bob wilkinson, milnthorpe, cumbria
A reassuring outlook for anyone who bought housing more than, say, five years ago, who isn't already being crushed by mortgage rates on over-priced housing and falling disposable income. And for anyone whose wages aren't being depressed by migrant labour. More depressing "news" for anyone under 30, trapped in btl rentals and even, dare I say it, HMOs; the modern equivalent of slum living. Most homeowners do indeed enjoy a "comfortable cushion of equity", but what of those who don't own homes? What's "equitable" for them about this situation?
Hopefully Anatole's usual shocking complacency and self-satisfaction will prove hopelessly misplaced and the MPC, coupled with the nicely-bubbling sub-prime pot, will boil over and tip us into a deep recession that many of us will welcome with open arms.
munro, Cambridge,
Reassuring and I hope you are right. I've been trying to sell a boat for the last couple of months and the mixture of rain and rate rises has not been conducive to much success. Mind you, it did help bargaining over the "new" one.
Andrew Fanner, Cowplain, UK
I admire this guy for sticking his neck out and making predictions. Commodity boom is still in its infancy so don't think inflation is going away just yet. My prediction, for what its worth, is 10% interest rates in 3 yrs.
Stu, Newc,
I cannot help feeling there may be some inconsistencies in your views on this subject. On the one hand you appear to assume that various asset bubbles in property, equities etc. will stay inflated. These have been largely the creation of rampant money supply combined with irresponsible lending practices and artificially low real interest rates. As inevitably happens with such cavalier economic arrangements the effects spill over after a time into prices in the broader economy and this is the process we have been seeing over the past year or two.
Only one of two outcomes now seem possible. Either the money supply stops growing and we start hearing some very loud bubble popping as a result. Alternatively price inflation continues to exceed the expectations of the MPC and the majority of economic commentators. I see no scope for the relatively painless outlcome you seem to envisage
J. Mackay, London, UK
Do not forget that sterling is seriously overvalued. When sterling falls it will facilitate inflation. The Bank of England will then be set on a damage limitation exercise with ongoing interest rate hikes. This is will be the beginning of a very troubled time for homeowners and borrowers.
Tony Makara, Manchester,
Is this article a joke or has AK been 'turned' by some agencies acting upon him?
Even the dumbest consumer knows by now that this country is heading for choppy seas and more and more borrowing should be avoided at all costs.
Steve, Salisbury,
We need higher interest rates to bring house prices down. The poorer people are those who are still young and have no chance of buying a house (or even half a house in expensive areas). It is them that are sufferring and having to waste money on paying rent to richer property investors.
Jake, Guildford, UK
I also disagree. With oil above $75 a barrel, the cost of dairy and wheat rising and China exporting inflation, inflationary pressures are not subsiding. CPI is still way above the banks preferred level and the more relevant RPI is running way above wage inflation. It is a very dangerous thing to tell people to borrow against their houses so they can go on holiday. Even if you have called the top correctly ( most economic commentators struggle to pick their noses ), now the era of cheap credit is falling off a cliff, so will commodity prices. Then all the holidays and plasma tv's, bought on the house ATM, have to be paid back. If people realised their TV costs double when paid for over 25 years I wonder if they would have been so hasty with their purchase.
Edward, London,
Does this not show that interest rates alone are too blunt an instrument for controlling house price inflation? There are too many knock-on effects elsewhere, like the strength of the pound and resulting difficulties for industry. Brown seems to have assumed that having granted a degree of independence to the Bank of England he can just sit back and let them get on with it. The housing market seems to require intervention from the Treasury to close buy-to-let tax loopholes, reform stamp duty and find a way of encouraging more effective use of existing unoccupied housing.
Nick, London,
Well if you're fretting over interest rates whilst on holiday.. well.. you obviously have made a bad move. Now we are in self-assurance territory. That is, you know it looks bad, but you have to think of ways to make you feel better, so just hold on in.. hold on all the way down that is. Losers hold on, winners get out when it starts to turn sour. Oh hold on, houses are investments to be gambled on right ? I never really thought they might be considered a home.
Fortiskew, C, Maltby, Yorkshire
I agree with the comments made. And I find it outrageous that lenders offer mortgages 5 x salary (and higher) and worse still interest only mortgages with no repayment vehicle - that was not allowed in the '80's and is a dissaster waiting to happen.
R Nelson, London,
"Only if interest rates keep rising or if house prices fall sharply, instead of just moving sideways, will the present pattern of borrowing in Britain become a cause for regret."
We're all OK then because hardly anyone thinks that interest rates will go any higher. And house prices normally move sideways after a boom, don't they?
Oh, hold on a minute...
TGS, Romsey, UK
What the average earner and mortgage payer will make of this article I cannot think.
OK so borrow for your holiday, this lasts two weeks the pain probably 52. Then buy the new car, loan over 10 years car life probably 3. Then the new kitchen to enhance you property value 10 year loan, do we add to the mortgage or pay a higher interest for something shorter term.
Your article fails to point out that if you have a blip in your employment or suffer some other unplanned happening you can always consolidate all your debts at an increased interest rate. Oh and by the way if this fails you will only loose your property.
Where will you be when your final analysis is wrong? Like the race horse tipster you will be well paid writing another article explaining exactly why the rules changed!!
paul, Cavirac, France
Is this the Times' advice? Spend the equity you have in your home? Don't worry about the future, spend now? I would have expected the Times to have suggested we invest. As for 'the average British family is still far better off than it was a year ago', how about some proof? One can state anything, but can you prove your claim? Or should it read 'the average friend of mine..'?
Dave Mc, London,
Mr. Kaletsky,
I do not agree with your upbeat assesment. Consumers cannot go on borrowing to fuel their spending, as at some point they have to repay the debt and with rising interest rates this gets more expensive. Interest rates will continue to rise as inflationary pressure on commodities percolates through the global supply chain. Simple fact is we do not make much in the UK anymore, most of what we buy comes from 'new world' economies such as China and India. Their currencies are undervalued, combine this with the fact that inflation will become rampant in their ecomonies as their citizens demand a better standard of living can only spell problems. My opinion is we are heading for big trouble; and people should prepare for the worst. All the feel good rhetoric portrayed in the rags to prop up the nerve of the happy go lucky investor will only deepen the cycle when it comes. Also remember we have sold all the gold, so there is nothing left to pull us out of the mire
DS, London,
Far more likely given the slightly contradictory nature of this article compared to the normal straightforward thinking that Mr Kaletsky that he is in need of a rather good holiday!
Do we really care what the MPC members like Rachel Lomax think today.? Is is surely evidenced by her recent record that she has underestimated the recent rise of inflation and was responsible for tipping the balance in favour of an irrational decision to cut rates 2 years ago. The market is usually pretty good at reading the signals and those don't look to good as Mr Kaletsky has described in his recent call for higher rates.
Have a good holiday!
franc petersen, london, england
You've forgotten to mention one thing. A slowing economy as rate hikes affect the consumer spending which is 2/3 of GDP.
This will effect, jobs, which in turn will affect house prices.
Andy, Salisbury, Wiltshire
Given approx only half of households have a mortgage on then how can most people be substantially worse off due to rate increases ? I would also dispute that the average British family is better off as a result of rising house prices, as unless they never move up the chain, they are in fact worse off as property prices rise and is borrowing against the increased value of your house rational given that all that happens is an extended/increased payment on the exsisting debt ?
Adam Foster, London,
"Only if interest rates keep rising or if house prices fall sharply, instead of just moving sideways, will the present pattern of borrowing in Britain become a cause for regret."
Reassuring stuff. House prices moving sideways seems to be the norm and a sharp fall an unexpected outcome. Could you point to the last time that house prices (adjusted for RPI inflation) moved sideways after a peak in the UK, or give an example of a country in which this occured?
TGS, Romsey,
"the average British family is still far better off than it was a year ago because of the increase in its property, pensions and stock market wealth – and this favourable wealth effect will allow most people to keep borrowing to maintain their spending patterns, despite the squeeze on their real incomes"
I obviously don't live in the same world as Anatole. At this point any increase in my house value or pension is paper value. It doesn't infulence how I live day to day. I only borrow today what I can afford to repay out of my current income. Indeed rising house prices mean my family as a whole is worse off since I will need to do more to help my kids get started.
Kevin Thompson, Reading, UK
I agree-anything approaching 6 % with sterling at 2.05 will kill the economy.The USA maybe have to now cut rates due to the sub prime problem-why would the BOE raise only to then perhaps cut again soon after when the UKs house market has hit the skids?
peter cunningham, Edinburgh, Scotland
This is the same AK that confidently calculated that there was a less than 50/50 chance we would go to war in Iraq! The reality is that everyone has less disposable income now versus last year - and that's the only economic indicator most people care about.
Colin H, Chester,
"the average British family is still far better off ... because of the increase in its property, pensions and stock market wealth "
And pray tell, what about those who have none of the above?
SMC, Bristol,
It is not in any way rational to borrow to go on holiday unless you are very confident of a sharp forthcoming increase in your net income. Very few people can be confident of this until it becomes clear whether the MPC has done enough to bring inflation back under control.
The attitude that housing equity is for spending is ridiculous - people will always need somewhere to live and paying off the mortgage is something that people have always needed to do before they can afford to retire or move to a bigger house.
Surely nobody is really suggesting that interest rate rises are inevitable. That's a straw-man. But the consensus is that further rate rises are more likely than not, for the simple reason that the latest data shows CPI inflation unexpectedly higher than expected.
A Clarke, London,
It is precisely this attitude that interest rates have peaked and the assumption that inflation will fall that got us in this situation i.e. the 3.1% inflation mark. Had the MPC been more assertive and raised interest rates earlier it might have been less drastic now. The problem here is interests rates around the world are going up and the general consensus is that they haven't peaked. Just look at the other side of the Atlantic they have been saying exactly what Kaletsky is in this article. Inflation has stubbornly stayed above the 2%. Oil prices aren't helping either. Now reality is beginning to dawn on them. Should we experience the problem in the housing market that the Americans have at the moment. Then a recession seems almost a certainty. The scary thought though is how long will the UK take to rebound from one?
Bebedi, London, UK
Semantics, but important semantics. Interest rates 'peak' only exceedingly rarely, and the general level of house prices even less so. Peaks are spikes; these crest or plateau, altogether more gently.
As to the likelihood of a further rise in interest rates, I agree with Anatole - and the Bank? - that fundamental considerations militate against this. Recently increased levels of debt, while sustainable over the population, must weigh on many families, and may well reduce consumption; if this were compounded by higher rates, the economy could falter, unemployment rise, and the problem spiral out of control; only the MPC is alert to this, making a drop more likely than an increase and stability a higher probability than either in the coming months.
Noel Falconer, COUIZA, France
It seem seems pretty imprudent to suggest the average consumer should continue to borrow, all cycles come to an end and it is clear there is one arriving but to suggest that rates are at their peak is a high gamble. Please also note the city has been right for the last year on the path of rates and the MPC wrong, so some of your reasoning appears flawed.
Simon, london,
Assuming home owners have to live somewhere - their own valuable asset - it is odd to suggest that they are better off as a result of higher house prices. They still, after all, live in the same house. Yes, there is a transfer of wealth between home owners and non home owners. But, unless a home owner can downsize or go in for equity release when older, the gain is on paper, and can't justify that new car. Unless home owners are happy to not leave their beloved house to their beloved children, they are not better off. And would find trading up more costly. Some comfort.
Helen Lewis, birmingham,
This article is a very elaborate attempt to shore up Britain's unsustainable consumption-led boom, as far as I can see. Anatole Kaletsky is confident that rates have reached their peak based on a.) the fact that three out of 9 of the BoE team voted to keep rates at 5.5% and b.) the fact that the BoE set rates month to month rather than on a long term course as in the EU and USA. So? I fail to see the significance of these points.
If core inflation contiues to rise - and it is - then rates will need to go up. The 3 members of the BoE and AK can delude themselves all they like but holding back now will only mean more pain later. Oil prices are still going up, food production prices are going up and the more you encourage the British family to borrow against the value of their home, the more inflationary pressures will grow.
Just face up to the pain: there has been an unsustainable spending binge and this has caused inflation which will inevitably lead to higher rates.
MB, Edinburgh,
I agree with CWW from Suffolk, Andy from Cambridge and Al from Newcastle, they are all right.! The MPC is way behind the curve on inflation. This article does sound elitist, (it sounds as if you are writing for investment bankers going off on holiday). And people who can't cope with minimal rises in interest rates clearly have overstretched themselves. This is where I believe the Bank of England has been most irresponsible. By not raising interest rates more strongly six months ago or more, they have allowed people to feel it is OK to carry on borrowing money, thus further fuelling the housing bubble, and creating an ever larger pool of people who will soon face bankruptcy. The housing market is an accident waiting to happen, but this won't badly affect those investment bankers going off on holiday. They will be protected by their huge pay packets!
Sally Copperwaite, Brentwood, Essex
Prediction is always dangerous especially when you're talking about the future(Mark Twain). The sub-prime mess in the US could knock on to a fire sale of assets.
If that happens, the effects will be assuredly felt in London.
There is no certainty that UK government spending is under control, as council tax climbs ever higher. Inflation is nearer 5% than the 2.5% claimed by the Consumer Price Index which Brown swapped over to from the Retail Price index as it excludes things like Council Tax which he then raised.
I don't think anyone's got a clue where we are as so much stealth and misinformation has been applied to economic statistics for so long. 5 million people of working age are idle in the UK and yet our unemployment figure is closer to 1 million.
Brown was not called the Enron Chancellor for nothing moving huge liabilities for pensions and PFI off his balance sheet. Interest rates could fly a lot higher. 8% is not impossible given the continuing inefficiencies.
Henry Curteis, LONDON, SW15
I wish people had this confidence.
Pete Balchin, Solicitor, Bristol, uk
Well, you obviously live in a world most of us don't. Talking about property, pensions and one's shares? Hello?
You will find that most people don't have at least one of those at all, don't understand the other, and only mums/dads of a certain age now have property, it being turned into a thing for the elite due to ridiculous prices.
So a lot of us us won't be going on holiday at all, dear writer, because our rent goes up, our pay rise is 1%, RPI is over 4% and 'real peoples' inflation is hurting our pockets. Borrow from my non-existant property, mmmmm.
Why are so many economic commentators so out of touch?
A Taylor, London,
Hmmm... 6-month LIBOR at 6%, 12-month LIBOR at 6.25%.
pni, Hove,
AK,
I always turn to your articles when I see them, your perceptions are unique and interesting. However, I do not see how we can be at the top of the rate cycle in UK, and presumably neither can the Forex traders.
What I would really like you to write about is post-Peak Oil.
Andrew Wilson, Paris,
I don't agree Mr Kaletsky... a FAR more correct, neutral rate WAS in the 8-9% territory, largely due to the ultra low rates since 9/11, very unnecessary, even within the MPC's remit. As a result of the MPC's decisions, which may have done wonders in the short term but they're disastrous for the longer term, monetary growth and inflation has soared to levels not seen before the rate was hiked into double-digits at the end of the 80s. I'd say the situation the UK is more precarious today as the economy's stronger than it was all those years ago. Unless the MPC get real, the UK could well be facing not recession but depression...
CWW , Suffolk,
One feature which distinguishes this area of what may have been the longest extended uptrend in the experience of most people has been the cautious and responsible approach to discussion of its sequel. One would like to think that in this respect there have been learnings from the past, and from what, in retrospect, can be seen to have been excesses.
Equally possibly, the techniques of imparting information in this context may have benefited from advances in that methodology, so that language use can be more suggestive of positive outcomes and less threatening or fearful of the unknown.
It may also be that the accelerated feedback and economic management systems enabled by information technology represent a paradigm shift to a world devoid of the extreme panics and manifestations of them seen in the past, and this would certainly be progress.
A mantra of the wise is to hope for the best but expect the worst, although that may seem more negative than intended.
dr venables preller, Warminster, UK
Well if Anatole Kaletsky says rates have peaked, I can be absolutely sure they have not. Why does the Times employ this fool? His track record is consistently wrong. It wasn't that long ago he was saying rates would peak at 5%. He seems to have little understanding of global currency markets, swap rates etc. The global currency markets have priced in rates at 6.25%. Do they know something Anatole doesn't.
I think if you are going to charge people for a newspaper, you ought to employ financial journalists who:
a) know what they are talking about
b) do not allow their vested interests to govern what they write
Declare an interest Anatole ... are you a property 'owner' - do you have a mortgage? Do you 'own' buy to let investments. Any financial advisor has to declare an interest before selling products. You should declare an interest - i.e. that you have an interest in seeing interest rates fall - so that people can take this on board before they decide to take on even more debt.
Mike Wilson, Reading,
well, there are opinions saying otherwise. Its a sad society that ponders the movement of interest rates by 0.25% whilst on summer holiday with the family. Also the assumption that 'we are all better off' - not everryone has property, and of those that do, not everyone has stocks, shares etc. This article sounds very pompous and elitist. And if i did have property, shares, pensions how can i pretend to be wealthy when i live in fear of interest rates. The current concept of wealth is false.
andy anderson, cambridge, england
Anyone who cant take a rise in interest rates of what has been 2.5% over 2 years obviously overstretched themselves.
Al, Newcastle,
Interesting article and probably against the consensus bearish analysis of the recent drop of CPI to 2.4% - The key statement which a lot of pessmistic reports of future interest rates seem to have missed is that the MPC said at the end of it's minutes of the last meeting "the news since the May Report had now been sufficient to shift the balance in favour of a move this month, without a clear presumption that further increases would be necessary." This was in paragraph 32 of the minutes and clearly agrees with Mr Kaletsky's view MPC does not necessarily believe further monetary tightening is on the cards.
Max, Manchester, UK