But the sudden slither of the last three years is disturbing. Borrowing seems to be driven by lifestyle choices rather than a social and economic needs. There is a fragility here.I suppose my own concern is the Mickey Mouse effect. You know, the cartoon character that is running along level ground, comes to a cliff and carries on running in mid-air for a few frames. Then he looks down, realises there is no ground underneath, and falls like a stone We know that economies have lags between cause and effect What we don't know is the duration of those lags.
It is only when people realise there is no ground underneath them that they fall.So what is the likely profile of rates then? The final graph shows the market consensus prior to this latest news of how the monetary committee voted last time - we don't yet have a new consensus report. As you can see, the market thought the first rise would come about the turn of this year and rates would climb to 4 per cent by the end of next year.Another way of measuring market expectations is not to look at what they say but what they do. The red lines shows the Banks' implied short-term interest rate, deduced from money market rates. This was taken before this news, but it has not changed much. As you can see, money markets were more bearish than City economists.Now look at the orange line. It shows what one independent firm of forecasters, Capital Economics, now reckons: 4.25 per cent by the middle of next year, then flat thereafter.That may or may not turn out to be right but it is a useful discipline.
What would happen to the housing market if mortgage rates were 0.75 percentage points higher than now? If it could stand that sort of rise, then we could still have a gradual adjustment next year If not, rougher times are ahead.. The fashion retailer Next escaped a bad day for London shares yesterday with the help of some pretty bullish comments from Deutsche Bank. Although the FTSE 100 index closed 66.7 points lower at 4,285.6, Next managed an 8p rise to 1,180p as the German broker argued that investors are greatly underestimating the company's potential. Deutsche raised its 2003 and 2004 earnings forecasts by 7 and 4 per cent respectively and assured those willing to listen to it that a period of prolonged growth is on the way at Next. "Although a new order of mid-market players has emerged, Next does have a distinct market positioning which should allow it to grow its market share," Deutsche argued as it lifted its price target all the way to 1,500p from 1,150p.Meanwhile, blue chips had their worst session for almost four months as investors were faced with the prospect of rising interest rates in the UK after it emerged that four of the nine members of the Bank of England's Monetary Policy Committee had voted against keeping rates on hold earlier this month. As an action comedy about four Vietnam war veterans turned mercenaries, The A-Team was an unlikely television hit. Which aphrodisiac works best for you?Harriet Borland, by e-mailI think the only aphrodisiac that works is having time and space to share alone with the person you want to make love to.
