Shock Rise Us Inflation

[I Told You So]

LONDON, Oct 18 (Reuters) - European shares fall to their lowest levels on the day on Tuesday after stronger-than-expected U.S. producer price data added to inflation worries and nerves about the future pace of interest rate hikes.

The FTSEurofirst 300 index dropped to a low of 1,192.93 in the wake of the data, down 0.17 percent on the day, while Germany's DAX was harder hit, extending losses to 0.31 percent to 4,962.11 points.

Britain's FTSE 100 also erased earlier gains to be down 9.5 points at 5,277 by 1248 GMT.

U.S. PPI rose by an unexpectedly large 1.9 percent last month, the biggest gain in more than 15 years, as energy costs surged in the wake of hurricanes that slammed into the U.S. Gulf Coast. For full story double click [nN17247033].

http://investing.reuters.co.uk/investing/f...-53_L18109402:1

Any bulls can forget about future rate cuts, the US are going to have to raise theirs further and we can only follow.

Im still betting on the a rise in UK rates early next year.

Edited October 18, 2005 by I Told You So

[karhu]

LONDON, Oct 18 (Reuters) - European shares fall to their lowest levels on the day on Tuesday after stronger-than-expected U.S. producer price data added to inflation worries and nerves about the future pace of interest rate hikes.

The FTSEurofirst 300 index dropped to a low of 1,192.93 in the wake of the data, down 0.17 percent on the day, while Germany's DAX was harder hit, extending losses to 0.31 percent to 4,962.11 points.

Britain's FTSE 100 also erased earlier gains to be down 9.5 points at 5,277 by 1248 GMT.

U.S. PPI rose by an unexpectedly large 1.9 percent last month, the biggest gain in more than 15 years, as energy costs surged in the wake of hurricanes that slammed into the U.S. Gulf Coast. For full story double click [nN17247033].

http://investing.reuters.co.uk/investing/f...-53_L18109402:1

Any bulls can forget about future rate cuts, the US are going to have to raise theirs further and we can only follow.

Im still betting on the a rise in UK rates early next year.

Very significant data.

[OnlyMe]

Seen predictions of US rate of 4.5% for early next year.

Just think what would happen to the £ with the normal relationship inverted and UK rates at 4.25%. The £ would get mullered and inflation would rocket.

ERM II?

[Guest]

How high can UK IRs go without busting people?

[FTBagain]

Ah! So that's why the markets tanked at 12:30. I knew someone on here would have the answer. Well that's it then the Boom is cancelled for the next ten years.

"Post Boom,

Comes Doom."

Sang to the "For Mash, Get Smash" tune. (Or have I just given away my age )

[OnlyMe]

Forgot to mention an important point. The bankruptcy fix is in for the US. The lenders are now freed from those troublesome easy defaults, safe in the knowledge that they can screw the borrowers down with the law on their side.

Was this all a game to make money for the banks and to hell with everything and everyone else?

0.5% in November?

[karhu]

Forgot to mention an important point. The bankruptcy fix is in for the US. The lenders are now freed from those troublesome easy defaults, safe in the knowledge that they can screw the borrowers down with the law on their side.

Was this all a game to make money for the banks and to hell with everything and everyone else?

0.5% in November?

Sounds like it. Just been talking to a friend in US. He reckons his monthly outgoings have nearly doubled, mainly due to high gas prices. That's serious inflation.

[FTBagain]

0.5% in November?

OnlyMe,

I doubt it. My guess is that the MPC will hold again, unless the next Fed rise on November 1st causes a run on the pound, which I consider unlikely as the markets have been pretty deft at "factoring in". Although, these figures undoubtedly came as a bit of a surprise, so perhaps the uncertainies are starting to over whelm the markets abilities to accurately predict what is happening.

Uncertianty is a key feature of turning points.

[OnlyMe]

OnlyMe,

I doubt it. My guess is that the MPC will hold again, unless the next Fed rise on November 1st causes a run on the pound, which I consider unlikely as the markets have been pretty deft at "factoring in". Although, these figures undoubtedly came as a bit of a surprise, so perhaps the uncertainies are starting to over whelm the markets abilities to accurately predict what is happening.

Uncertianty is a key feature of turning points.

Ah no I was refering to US rates going up 0.5%. Brown is hell bent on keeping rates low with possibly interesting results.

[FTBagain]

Ah no I was refering to US rates going up 0.5%. Brown is hell bent on keeping rates low with possibly intersting results.

Ah! OK I see where you are coming from given karhu's post. I still think Greenspan will play it steady, after all he is retiring is the New Year. Central Bankers are probably the only bread of human's who would prefer to go out with a wimper, rather than a bang!

I would say 0.25% in the US, but for sometime to come. They were talking about the end of the upward cycle that, I would suggest, is no longer the case.

Sounds like it. Just been talking to a friend in US. He reckons his monthly outgoings have nearly doubled, mainly due to high gas prices. That's serious inflation.

Looks like the US are chasing us hard in the economic cycle. Given the low level of taxes on energy in the US 'real' price hikes will lead to higher percentage rises to the consumer. That is likely to have a much faster knock on effect in the US economy.

[TW11]

Might be a chilly winter:

Brrrr

[FTBagain]

Might be a chilly winter:

Brrrr

Ouch that's inflation alright. Cold Xmas coming, in more than one way, me thinks.

[Realistbear]

How high can UK IRs go without busting people?

IRs may not be the problem. The government really can't move either way because to lower them will hit the pound and to raise them will precipitate a HPC a few months earlier.

The problem is the sheer amount of debt. Interest rates have never been higher when you take into account debt levels. Better to borrow 50k at 10% than 150k at 4%.

The seeds of the next HPC are already coming to fruition--people have nothing left to fuel the rest of the economy hence the High Street retail crash that is going on. Saw the same thing in the late 1980's--people were feeling rich on the way up and spent lavishly but as soon as the market stalled the whole economy ground to a halt and the HPC followed. To sum it up--homeowners who have overspent are losing their bottle and confidence is the only thing that holds bubble markets up.

In the words of Mervyn King: House prices are a matter of opinion whereas debt is real.

People are just realizing they owe too much and their private bank (their home) is a depreciating asset.

[gone west]

Ouch that's inflation alright. Cold Xmas coming, in more than one way, me thinks.

No it's not!

Energy, food and house prices don't count in the official inflation figure. Too volatile you see. You don't need that stuff anyhow. All you need are cheap DVD players and George at Asda clothing.

[OnlyMe]

Candada raises to 3%, with more to come. Prediction of 1% more by April !

http://www.mytelus.com/news/article.do?pag...ticleID=2058961

Tuesday, Oct 18, 2005 Email this to a friend

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More interest rate increases are in the works, the Bank of Canada says

OTTAWA (CP) - There was no surprise Tuesday as the Bank of Canada nudged up its key overnight interest rate by a quarter percentage point to 3.0 per cent.

Chartered banks followed the increase, boosting their prime rates - those charged their best customers - a quarter point to 4.75 per cent. And more rate increases are in the works, likely starting at the next rate-setting Dec. 5.

"The bank clearly states that further increases to the overnight rate are coming in order to ensure inflation remains well-behaved," said Jack Homareau, an economist at Royal Bank. "This hawkish stance by the bank does not surprise us."

Eric Lascelles, an economist with TD Bank predicted the overnight rate will be at four per cent by April.

[gone west]

Candada raises to 3%, with more to come. Prediction of 1% more by April !

http://www.mytelus.com/news/article.do?pag...ticleID=2058961

Tuesday, Oct 18, 2005

More interest rate increases are in the works, the Bank of Canada says.

YES! YES! YES! Cash is king!

[MarkG]

Candada raises to 3%, with more to come. Prediction of 1% more by April !

Hopefully that means I'll be getting more interest on my Canadian dollar account .