King sends rates warning to borrowers
Interest rates are going up. We don't know when: it might be as soon as May, it might not be until next year, if you give credence to the more dovish economists.
But the rock-bottom rate of 0.5% we have had for almost two years will not persist indefinitely, as Bank of England governor Mervyn King pointed out.
With inflation at 4% - double its target rate - and predicted by the Bank to rise to 5% this year, the pressure is on.
But there are two key questions: whether higher interest rates would actually tame inflation, and whether the economy can withstand the pain. It is not obvious that the answer to either is 'yes'.
Persistently high inflation in the UK is a bit of an oddity in the sense that it has not beset other leading economies in the same way.
Once elements such as taxes and commodity prices are stripped out, however, our figure is not so far out of kilter. A hike in British interest rates would not have much impact on external factors such as the global energy market.
The 25% fall in the pound in 2007/8, which has driven up the price of imports, is another contributor, though this has been instrumental in helping rebalance the economy in favour of manufacturing and boosting exports.
Hiking rates prematurely could nip an export-led recovery in the bud.
It's important to be aware of what is driving inflation, but even more important to take note of what is not, namely pay.
Historically, the big fear about inflation is that it will fuel higher wage demands, sparking a vicious upward spiral, but there is no evidence this is happening this time.
Bankers aside, most of us are taking pay cuts in real terms, and seeing a fall in our standard of living. With jobless figures yesterday coming in higher than expected, most employees are taking it on the chin, rather than agitating for more.
King warned that growth is likely to be slower than expected this year and we have yet to feel the force of the austerity cuts.
Of course it is desirable to have interest rates at more normal levels, not least for the sake of suffering savers, who outnumber mortgage borrowers by six to one - but given that the economy is nowhere near back to normal there are strong arguments against starting the process soon.
Obviously, that doesn't mean it won't happen: more hawks could flock to the side of MPC members Andrew Sentance and Martin Weale, who have already voted for an increase.
The prudent thing is to remember that a normal rate, of say, 5%, is ten times higher than where we are now, and to make any long term financial plans with that in mind.
Banking on low rates continuing is to live in a fool's paradise.
Super Marius
It is understandable that BHP Billiton chief executive Marius Kloppers is gun-shy of attempting another big acquisition after failing to take over Rio Tinto and then having to abandon a bid for Potash Corp of Canada.
In any case, prices of potential targets are high, and it is hard to think of a deal big enough to make a material difference to the world's biggest mining company.
So Kloppers, who has reported record half-year profits thanks to rising commodity prices, is to buy back £6.25bn of shares from investors and to spend a cool £50bn on developing projects in Australia, Chile and Canada.
The sheer scale of this planned expenditure is awesome, and investors might fret that BHP will struggle to use the money efficiently. But it's hard to imagine that the ambitious Kloppers will not re-enter the deal fray at some point.
And in the scheme of things, having more money than you might know what to do with is not the worst problem a chief executive can have.
Curse returns
Can anyone escape the curse of the CBI? Bad fortune has dogged Sir Clive Thompson, formerly a highly successful boss at Rentokil, ever since he took the presidency of the bosses' organisation.
First Rentokil's shares sank, then he ran into bother over his chairmanship of failed Christmas savings club Farepak, an involvement that now leaves him facing possible disqualification as a director.
Lord Marshall of BA and Sir Iain Vallance of BT saw shares in their companies suffer when they took the reins at the lobby group.
Let's hope Centrica chairman Sir Roger Carr, who takes the CBI presidency this summer, has been stocking up on lucky charms.
Most watched Money videos
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- New Volkswagen Passat launch: 150 hp mild-hybrid starting at £38,490
- Mini celebrates the release of brand new all-electric car Mini Aceman
- Mini Cooper SE: The British icon gets an all-electric makeover
- Top Gear takes Jamiroquai's lead singer's Lamborghini for a spin
- Incredibly rare MG Metro 6R4 rally car sells for a record £425,500
- Mercedes has finally unveiled its new electric G-Class
- A look inside the new Ineos Quartermaster off-road pickup truck
- Kia's 372-mile compact electric SUV - and it could costs under £30k
- Leapmotor T03 is set to become Britain's cheapest EV from 2025
- Porsche 'refreshed' 911 is the first to feature hybrid power
- Introducing Britain's new sports car: The electric buggy Callum Skye
- Capita to announce new tie-up with Amazon Web Services to...
- CITY WHISPERS: De Beers hangs on to the artworks in Anglo...
- The bold moves you can make NOW to keep your pension out...
- ALEX BRUMMER: What you can learn from MY investing...
- Stock Exchange's boss JULIA HOGGETT admits she is privileged
- New hope on three continents after leaders elected in...
- HAMISH MCRAE: Never mind the Election - cut interest rates!
- Scrap share tax, says Abrdn boss: Investors DO back UK...
- British Fashion Council warns Shein's planned £50bn float...
- Stop the £40bn bank interest racket: Calls from across...
- ALLIANCE TRUST: The 'dividend hero' that's poised to...
- MIDAS SHARE TIPS UPDATE: Our private equity stock tip is...
- MIDAS SHARE TIPS: Silver is making its mark as global...
- Our father died seven years ago, why are we still waiting...
- JEFF PRESTRIDGE: Cash in on the super ATMs of the future
- What does it take to win the Premium Bonds - and is it...
- MARKET REPORT: Hangover for cider seller as boss makes...
- ALEX BRUMMER: Vision for the UK's future missing during...