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bubbleturbo

Us Rates Expected To Be Up To 5% Next Year, Uk Rates To Follow Or Lead The Way ? ? ? ?

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Hello Chartists

Can someone publish a chart which shows US & UK interest rates again time. Then we can debate how high UK interest rates are likely to go.

What are the reasons for UK rates to go up, when relating to US interest rates?

Regards,

:D

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Yes we seem to be about a year in front of them – so next year we might see them lower interest rates like us in the UK?

Or perhaps the Bank of England has been a bit premature in lowering interest rates – although I cannot see the BOE raising them more than 0.5 % if they have to. If the BOE raise interest rates even as little as 0.5% surly that will push us over the edge into a unstoppable crash

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The problems the BofE has is that if world rates go up, led by the Fed, then we will have little choice but to follow.

The US led the way down and it looks like they may lead the way up. I think the oil price stuff is going to push inflation up in time and that is why the world banks are sounding Hawkish.

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What are the reasons for UK rates to go up, when relating to US interest rates?

We no longer have an idiginous manufacturing or raw materials industry to speak of and the bulk the food we eat is imported.

All of these imports are price in or relative to the $. If the £ falls significantly against the $ these imports become more expensive......leading to a spiral, where inflation devalues the £ further, leading to more inflation, rising industry costs, unemployment etc. eventually economic ruin.

In order to prevent the £ from falling significantly against the $ the BOE needs to keep our IR broadly in line with move by the Fed.

Hence if the Fed raises rates sooner or later we have to follow suit. The US has an immense advantage as a global trader as it happens to have the world reserve currency as it's domestic currency. 100 years ago £ enjoyed the same status.

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Hola... Chart is out of date and doesnt show recent fed raises, its been lieing around since it i last posted it. I cant be bothered tracking down all the relavant data again but it shows the trend....

The chart was last updated when FED at a very low point!!! just draw a line to 5% and you can see how uk risers are unavoidable. Traditionally uk rates are 2->3% above us rates

Uk_IR__US_IR__UK_HPI_Graph.JPG

post-552-1130859021_thumb.jpg

Edited by moosetea

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Hello Chartists

Can someone publish a chart which shows US & UK interest rates again time. Then we can debate how high UK interest rates are likely to go.

What are the reasons for UK rates to go up, when relating to US interest rates?

Regards,

:D

Nayved in very simple terms (i'm a nerd not an economist :D ):

A stable currency and decent interest rate attracts investment, in order for foriegners to invest in the UK they have to sell their currency and buy GBP - therefore there is a demand for our currency vs theirs and it props the value up. If interest rates keep rising globally then it will be more attractive for investment to go elsewhere, hence denting investment in the UK and consequently affecting the GBP value. The differential between UK and US rates is due to the percieved extra risk of making investments in GBP vs USD.

Now in a global market where a lot of our consumables are imported and priced in $, the government can't afford a flight from the £ as our currency would weaken and lead to knock on inflation.

Edited by mescalinemonkey

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I thought that the BofE was independent and had nothing to do with the government

Interest rates are set by the Bank’s Monetary Policy Committee. The MPC sets an interest rate it judges will enable the inflation target to be met. The Bank's Monetary Policy Committee (MPC) is made up of nine members – the Governor, the two Deputy Governors, the Bank's Chief Economist, the Executive Director for Markets and four external members appointed directly by the Chancellor. The appointment of external members is designed to ensure that the MPC benefits from thinking and expertise in addition to that gained inside the Bank of England.

http://www.bankofengland.co.uk/monetarypolicy/overview.htm

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Thanks for posting the chart!

It does seem that UK interest rates have a history of being higher than US interest rates.

However, from the chart, it does not follow that UK will have to rise, US interest did go higher when killing "inflation" but the turning point for both rates is common sometimes.

I understand why UK rates should be higher. Thanks for that.

Taking the charts & comments into consideration, my feeling is that the BoE will sit tight and start reducing rates when US does at the end of next year possibly.

As I recall, UK rates were going to rise to 5.5% but they only got as far as 4.75%.

I imagine US rates will peak at 4.25% or 4.5% and BoE can live with that.

Regards,

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Thanks for posting the chart!

It does seem that UK interest rates have a history of being higher than US interest rates.

However, from the chart, it does not follow that UK will have to rise, US interest did go higher when killing "inflation" but the turning point for both rates is common sometimes.

I understand why UK rates should be higher. Thanks for that.

Taking the charts & comments into consideration, my feeling is that the BoE will sit tight and start reducing rates when US does at the end of next year possibly.

As I recall, UK rates were going to rise to 5.5% but they only got as far as 4.75%.

I imagine US rates will peak at 4.25% or 4.5% and BoE can live with that.

Regards,

What, so you think the BoE (and UK plc) can live with a new paradigm of pound dollar parity? er...I think not - the resons above show why we would suffer for that in the longer term.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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