Inflation delayed - or eliminated

Good inflation related (UK) link here: http://www.telegraph.co.uk/finance/economics/7925564/Interest-rates-will-go-up-quicker-than-anyone-expects-ex-Bank-of-England-officials-warn.html

Having established higher margins above the current low interest rates, I think the banks can't wait to see interest rates rise. They'll continue to reap the same margin from borrowers as well as attract more savers/investments.

But it will kill the so called 'over-borrowed'. Loans which are serviceable now will rapidly become at risk with just a few points rise which could amount to a doubling or more of current low rates.

Surely 'inflation' is already being curbed by more 'responsible lending' and we shouldn't need the one-size-fits-all mallet of interests rates this time.

On the China inflation factor I have no clue.

Thanks John,

Banks in the Nordics have learned some lessons in the past and quite systematically stress-tested lenders capability to pay higher interest rates - which invariably will come. I do hope this goes for most regions - but occasionally the fierce competition may lead to too much erosion both of margins and quality. 

If the developing countries are allowed to continue to eliminate inflation with more cheap labour there will of course be less need for higher interest rates.

But then there is this other side - how much manufacturing should we really export. The quarterly capitalism is such turbo here - and short term gains can often be long term damage. At least Andy Grove thinks so: 

http://www.bloomberg.com/news/2010-07-01/how-to-make-an-american-job-before-it-s-too-late-andy-grove.html