Jump to content
House Price Crash Forum
Sign in to follow this  
Economic Sensation

70% Of Economists Think The Next Rate Move Will Be A Cut

Recommended Posts

Now i know most of you will disagree with this and you will trot out the usual arguments about why you know more than the professionals but i thought that you might like to see this. Don't shoot the messenger, although it does tally with what i have been saying.

According to a recent Reuters poll out yesterday of 44 economists, 70% think the next move by the Bank of England will be a rate cut rather than a rate hike, most probably in February. All expect rates to remain unchanged at the November meeting on signs that the housing market has stabilised, but growth remains a concern. 26 of the economists feel the next move will be a cut in the 1st quarter, 3 expect a cut in the 2nd quarter and a couple others at another time in 2006.

It didn't show the what the others said, but the range of forecasts for the end of 2006 was 3.5% to 5%, so even the worst among them didn't think rates could rise more than 50 basis points.

It obviously remains dependent on inflation, but as it rose less than expected to 2.5% in September and as core inflation remained low. Median forecasts are for rates to 4.25% by the end of Q1 and remaining at that level for the rest of the year.

All good fuel for another fantastic house price rally :):):P

Fantastic.

Share this post


Link to post
Share on other sites

All good fuel for another fantastic house price rally :):):P

It sounds reasonable to me, especially if the economy goes into recession. I would contest the house price rally bit though. The last interest rate cut has hardly had a dramatic effect. My street is still a sea of over grown for sale signs.

Nice.

Edited by jellybean

Share this post


Link to post
Share on other sites

All good fuel for another fantastic house price rally :):):P

Fantastic.

Indeed, they're basically saying our economy is so strong it cannot even sustain interest rates at a whopping 4.50%, the sound economic footings that will ensure property prices never fall, ever

:lol:

Share this post


Link to post
Share on other sites

Why on earth these schmucks reckon that falling IRs are a good sign for the economy, is beyond me. Was it good for Japan? Being a contrarian, I reckon rising IRs are a sign of a good economy and vice versa.

If the BoE do cut rates, which they may well do, it will be tacit admission that the property market is extraordiarily weak, consumer spending has ground to halt and whisper it softly, they're petrified of.....

.....ASSET DEFLATION

Share this post


Link to post
Share on other sites

Why on earth these schmucks reckon that falling IRs are a good sign for the economy, is beyond me. Was it good for Japan? Being a contrarian, I reckon rising IRs are a sign of a good economy and vice versa.

If the BoE do cut rates, which they may well do, it will be tacit admission that the property market is extraordiarily weak, consumer spending has ground to halt and whisper it softly, they're petrified of.....

.....ASSET DEFLATION

Then what happends when the cut is absorbed and people have fully leveraged upto that level and consumption drops back again, do we just do the same cycle over again until rates are 0%. When you're only at 4.50% and below you don't have the same margin for cuts than 8%.

They're essentially calling for a bulimic interest rate cycle!

Share this post


Link to post
Share on other sites

Why on earth these schmucks reckon that falling IRs are a good sign for the economy, is beyond me. Was it good for Japan? Being a contrarian, I reckon rising IRs are a sign of a good economy and vice versa.

If the BoE do cut rates, which they may well do, it will be tacit admission that the property market is extraordiarily weak, consumer spending has ground to halt and whisper it softly, they're petrified of.....

.....ASSET DEFLATION

Sherminator you are right, rising IR's are a good sign of an economy, they are raised to control growth and you are also right that flaling IR's are good for the economy as it stimulates growth, but they are a sign that it is not doing well.

Rising IR's = healthy economy

Falling IR's = sick economy

Ours is sick. Japan's had other problems, many other problems, but when it was ill they didn't raise rates did they, they cut them. And in the US where growth is strong, they are lifting them.

They know the housing market is finely balanced, thats why they don't want to raise them, for fear of sparking off the price crash that you all want.

Share this post


Link to post
Share on other sites

Sherminator you are right, rising IR's are a good sign of an economy, they are raised to control growth and you are also right that flaling IR's are good for the economy as it stimulates growth, but they are a sign that it is not doing well.

Rising IR's = healthy economy

Falling IR's = sick economy

Ours is sick. Japan's had other problems, many other problems, but when it was ill they didn't raise rates did they, they cut them. And in the US where growth is strong, they are lifting them.

They know the housing market is finely balanced, thats why they don't want to raise them, for fear of sparking off the price crash that you all want.

Cut all the way to 0%. It won't help. Japan has had 0% for a decade. Didn't help them.

Share this post


Link to post
Share on other sites

Now i know most of you will disagree with this and you will trot out the usual arguments about why you know more than the professionals but i thought that you might like to see this. Don't shoot the messenger, although it does tally with what i have been saying.

According to a recent Reuters poll out yesterday of 44 economists, 70% think the next move by the Bank of England will be a rate cut rather than a rate hike, most probably in February. All expect rates to remain unchanged at the November meeting on signs that the housing market has stabilised, but growth remains a concern. 26 of the economists feel the next move will be a cut in the 1st quarter, 3 expect a cut in the 2nd quarter and a couple others at another time in 2006.

It didn't show the what the others said, but the range of forecasts for the end of 2006 was 3.5% to 5%, so even the worst among them didn't think rates could rise more than 50 basis points.

It obviously remains dependent on inflation, but as it rose less than expected to 2.5% in September and as core inflation remained low. Median forecasts are for rates to 4.25% by the end of Q1 and remaining at that level for the rest of the year.

All good fuel for another fantastic house price rally :):):P

Fantastic.

It was noticed long ago and has been indeed published in academic press that the range of forecasts in polls like this tend to consistently underestimate the probability of “extreme events”. Moreover, when there may be an interesting diversity among short-term forecasts, “expert polls” focused on longer periods tend to lose their richness of opinions and degenerate.

I would not be so sure that the predicted 3.5% to 5% range covers even 50% of the distribution.

Share this post


Link to post
Share on other sites

Then what happends when the cut is absorbed and people have fully leveraged upto that level and consumption drops back again, do we just do the same cycle over again until rates are 0%. When you're only at 4.50% and below you don't have the same margin for cuts than 8%.

They're essentially calling for a bulimic interest rate cycle!

That is such a good point, one that is often overlooked.

Feed them more debt until it makes them sick, so long as the short term figures look good.

Its the way of the world now, USA debt 2.8xGDP!

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp
All good fuel for another fantastic house price rally

I give up and am throwing in the towel. :(

Share this post


Link to post
Share on other sites

This should read as 70% of economists would like to see a rate cut, don't mean they're gonna get it necessarily, as UK rates will be out of the hands of the BoE by 2006.

Imagine this, US IR 6%, UK IR 3.5% => £=$ (parity) => UK Inflation =======> 15%!

NuLab, old danger? I don't think so!

9 out of 10 cat owners said their cat prefers Whiskers don't mean you have to eat the stuff yourself does it?

I shouldn't bother whoops. Economic sensation doesn't accept a relationship between the UK's rates and those in the US. See yesturdays thread on the Nationwide figures and count the number of times he ignores similar points.

Share this post


Link to post
Share on other sites

Now i know most of you will disagree with this and you will trot out the usual arguments about why you know more than the professionals but i thought that you might like to see this. Don't shoot the messenger, although it does tally with what i have been saying.

According to a recent Reuters poll out yesterday of 44 economists, 70% think the next move by the Bank of England will be a rate cut rather than a rate hike, most probably in February. All expect rates to remain unchanged at the November meeting on signs that the housing market has stabilised, but growth remains a concern. 26 of the economists feel the next move will be a cut in the 1st quarter, 3 expect a cut in the 2nd quarter and a couple others at another time in 2006.

It didn't show the what the others said, but the range of forecasts for the end of 2006 was 3.5% to 5%, so even the worst among them didn't think rates could rise more than 50 basis points.

It obviously remains dependent on inflation, but as it rose less than expected to 2.5% in September and as core inflation remained low. Median forecasts are for rates to 4.25% by the end of Q1 and remaining at that level for the rest of the year.

All good fuel for another fantastic house price rally :):):P

Fantastic.

Ignoring the old joke that if you put 12 economists in a room and give them a problem to consider they will come back with 13 different answers, I'd say your comments above are broadly right... except perhaps the conclusion.

I'm afraid I lost the logical argument as to why there will be "another fantastic house price rally". I can only assume this is a jokey attempt at bear-baiting rather than an intelligent comment.

I believe Roger Bootle has argued for some time that our economy is significantly weaker than the consensus seems to suggest and consequently we ARE heading for something like 3.5% interest rates (was he the bottom end of this anonymous forecasting session perhaps?) along with a 20% nominal terms correction in house prices (I can't remember if he said end 2006 or end 2007, I'm sure someone else can add this information).

I'd say that is probably about right - a weaker economy, far from feeding "another fantastic house price rally" is more likely to make vendors, estate agents and vested interests face the rather uncomfortable reality that everyone got a little carried away and prices ran too high and now need to come back to earth.

I've argued before on this site that summer 2004 house prices were "priced for perfection"... a perfection that unfortunately doesn't exist. The question is, will this perfection arrive or will prices correct? I think any intelligent person who thinks about this dispassionately knows the answer. The real shame is that none of us can predict the timing.

Edited by London-loser

Share this post


Link to post
Share on other sites

That is such a good point, one that is often overlooked.

Feed them more debt until it makes them sick, so long as the short term figures look good.

Its the way of the world now, USA debt 2.8xGDP!

Weird thing is this government's got another 4 years - you'd think they'd want to start thinking about damage limitation at this point, not making the bubble bigger. Very annoying for people trying to save.

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp

Weird thing is this government's got another 4 years - you'd think they'd want to start thinking about damage limitation at this point, not making the bubble bigger. Very annoying for people trying to save.

The real reason why they went to the country a year early.

Get the pain over hoping things will look much better five years on, the time when the next election will be held.

2006 will be the year the real pain begins.

Share this post


Link to post
Share on other sites

plus..

the MPC did not discuss cuts and the head announced that they were likely to rise in a speech...

they make the decisions..

(well sort of... Gordon won't want a drop.. )

Share this post


Link to post
Share on other sites

Indeed, they're basically saying our economy is so strong it cannot even sustain interest rates at a whopping 4.50%, the sound economic footings that will ensure property prices never fall, ever

:lol:

Good point. People say, Ohyeah, the economy's been great under Brown; but all it took to cut growth off with a whimper was a measly 4.5%. And that growth was financed by unprecedented consumer spending and by the government blowing the budget surplus it inherited from Ken Clarke. Imagine how puny growth in the economy would have been otherwise. But now both those things have come to a halt.

I think Bootle may have got the trough wrong. It looks as if US rates will go the best part of another percentage point up in the next few months, and it's hard to see how ours can remain at the current level without the pound taking a kicking. But after that you'd think that US spending would slow down like ours has, in which case the Fed would gradually take the brakes off.

What's going to happen next year also of course depends on whether the Far East keeps on buying dollars. My bet would be that everything's OK as long as the market thinks we're still on the upward track. But after that ..... (shudders)

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 302 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.