Culpability Brown Posted December 13, 2005 Share Posted December 13, 2005 Marketwatch Quote Link to comment Share on other sites More sharing options...
Dames Posted December 13, 2005 Share Posted December 13, 2005 Nearly in line then. Quote Link to comment Share on other sites More sharing options...
Culpability Brown Posted December 13, 2005 Author Share Posted December 13, 2005 And they're not done yet: - "Some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable growth and price stability roughly in balance," the committee said. US Rates will be at 4.5% by the middle of Jan 2006. Uk rates up by 0.25% in Feb is my guess. Quote Link to comment Share on other sites More sharing options...
Guest Charlie The Tramp Posted December 13, 2005 Share Posted December 13, 2005 Uk rates up by 0.25% in Feb is my guess. Yep, let them digest all that holiday over indulgence, and then administer a goods dose of salts. Quote Link to comment Share on other sites More sharing options...
Culpability Brown Posted December 13, 2005 Author Share Posted December 13, 2005 Yep, let them digest all that holiday over indulgence, and then administer a goods dose of salts. Indeed - And then a couple of months later hugely inflated council tax bill start landing on doormats & the possibility of more stealth tax increases from the Treasury come into play. Quote Link to comment Share on other sites More sharing options...
oracle Posted December 13, 2005 Share Posted December 13, 2005 And they're not done yet: - "Some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable growth and price stability roughly in balance," the committee said. US Rates will be at 4.5% by the middle of Jan 2006. Uk rates up by 0.25% in Feb is my guess. hear hear to that.....if the fed were done they would have removed the measured/accommodative bit of the statements in favour of a balanced risk caveat.....sounds to me like 5% is on its way,unless the housing market breaks down rapidly before. so as far as UK goes,it'll be rates up or houses down to match the fed. ...come to think of it,this could be why the pound went back up towards $1.77,and 10yr bond yield rising. ...a slow realisation is dawning in fixed-income/forex markets. Quote Link to comment Share on other sites More sharing options...
bubbleturbo Posted December 13, 2005 Share Posted December 13, 2005 OK this all makes sense. Also, someone pointed out today that UK IR futures are still pricing in rises for next year. After this Fed statement, we will probably see that hold up as the realisation hits home in more places that for rates here, the risk is still on the upside. One question though: Why are ING reducing the savings rate - this worries me as they did this before the August cut :angry: Any ideas?? Quote Link to comment Share on other sites More sharing options...
Culpability Brown Posted December 13, 2005 Author Share Posted December 13, 2005 OK this all makes sense. Also, someone pointed out today that UK IR futures are still pricing in rises for next year. After this Fed statement, we will probably see that hold up as the realisation hits home in more places that for rates here, the risk is still on the upside. One question though: Why are ING reducing the savings rate - this worries me as they did this before the August cut :angry: Any ideas?? To increase profits. They've said it is in response to tough economic conditions. Maybe they've been gambling a little with some of that cash they have on deposit. Who knows. The action of ING doesn't cloud the picture. The actions of the FED on the other hand? Quote Link to comment Share on other sites More sharing options...
Guest Charlie The Tramp Posted December 13, 2005 Share Posted December 13, 2005 Why are ING reducing the savings rate - this worries me as they did this before the August cut Any ideas?? Well I reckon they have grabbed a good market share and will now revert to the norm in line with other lenders rates for savers. Quote Link to comment Share on other sites More sharing options...
Golden Shower Posted December 13, 2005 Share Posted December 13, 2005 But CPI is dropping, why will they need to raise IRs in the UK? Does sound like the Fed will be getting more aggresive though. Quote Link to comment Share on other sites More sharing options...
verolution Posted December 13, 2005 Share Posted December 13, 2005 Comments seen as quite dovish: http://www.nytimes.com/2005/12/13/business...artner=homepage As much as I'd like to see rate rises over here it just isn't gonna happen anytime soon IMHO. Gordo would rather have £1 = $1 than damage his precious housing market! Quote Link to comment Share on other sites More sharing options...
oracle Posted December 13, 2005 Share Posted December 13, 2005 But CPI is dropping, why will they need to raise IRs in the UK? Does sound like the Fed will be getting more aggresive though. well the bond market is picking up a little bit.the 10yr yield has crept up from 4.20 ish to 4.33,which means that rather than pricing in 1 more rate cut,the market is now looking at no change. however,it should still be possible to raise rates...though the yield curve will invert a bit more. worth putting in perspective we are just coming out of a 15 year-long bond bull market also.....so there may well be some suckers around being "advised" to put their money somewhere "safe" The general public have absolutely no idea that bond market price works the opposite way round to stock prices in a rate-climb scenario.....the bond market is probably one of the least safe investments you could have at the moment!!!....along with corporate bonds,and property. Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted December 13, 2005 Share Posted December 13, 2005 The US Media analysis is that rate hikes are over - see the video on the marketwatch link of the OP. Quote Link to comment Share on other sites More sharing options...
Guest Charlie The Tramp Posted December 13, 2005 Share Posted December 13, 2005 The US Media analysis is that rate hikes are over - see the video on the marketwatch link of the OP. Kellner: Fed will hike at least one more timeMarketWatch chief economist Dr. Irwin Kellner says the Fed's policy statement is good and bad news, "depending on whether you're looking at the glass half-full or half-empty." Either way, he predicts "at least one more [rate hike] in January." Irwin Kellner then went on to say a further two hikes are possible later in 2006. Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted December 13, 2005 Share Posted December 13, 2005 That would be VERY nice. Quote Link to comment Share on other sites More sharing options...
Hairlocks Posted December 13, 2005 Share Posted December 13, 2005 Someone somewhere on this forum said that the UK interest rate have only twice briefly been below the Fed fund rate has anyone got that data to prove this? Quote Link to comment Share on other sites More sharing options...
OzzMosiz Posted December 13, 2005 Share Posted December 13, 2005 Someone somewhere on this forum said that the UK interest rate have only twice briefly been below the Fed fund rate has anyone got that data to prove this? Nope, but I have seen the graphs, and our rates didn't last long below their rates. We soon hiked them up. Quote Link to comment Share on other sites More sharing options...
Jason Posted December 13, 2005 Share Posted December 13, 2005 Someone somewhere on this forum said that the UK interest rate have only twice briefly been below the Fed fund rate has anyone got that data to prove this? I e-mailed the bank of england about this, there reply: My e-mail: Dear Bank of EnglandFurther to interest rate and monetary policy could you help me understand what effects FED interest rates have on our interest rate policy? UK interest rates have constantly been above the US rates, apart from (I believe) on two occasions where UK rates were increased aggressively as a result. As the FED plan to increase at every meeting until at least January, US rates will be at 4.5%. Would this prevent the MPC from reducing rates? And would it force interest rates to increase due to the devaluing pound (as UK rates are usually set higher than the US rates)? I understand that interest rates are solely to target inflation (the media would have you believe otherwise), and any currency changes effect the 'buying power' when buying imports. But I would like to further understand the relationship. Also, if interest rates are to increase because of this (or any other) issue, would it not be better for rates to increase this month? Kind regards Their reply: Thank you for your e-mail of 7 November, concerning the relationship between UK interest rates and those of the US. Your e-mail has been passed to me to reply. Before turning to your question, I thought that it was worth briefly reiterating our role in setting interest rates and what we are trying to achieve. As you know, the remit of the MPC is to set interest rates to meet the Government's inflation target of 2% as measured by the 12-month increase in the Consumer Prices Index (CPI). When the MPC meets each month they have to take into consideration a range of factors and information about what is happening in the economy as a whole and the prospects for inflation looking ahead and set rates accordingly. There are some factors that may in themselves point to higher interest rates, while others suggest lower rates or no change. But it is a balance of all factors and the overall outlook for inflation that the MPC has to judge. In setting rates, the Bank cannot look at one part of the community alone. We have to look at the nation and the economy as a whole and identify the right rate of interest that will enable us to meet the inflation target. I can assure you that the decisions taken by the MPC are made solely to meet the inflation target and are not made in order to benefit or disadvantage any one sector of the economy, for example, the MPC does not target sterling exchange rates to benefit importers or exporters. Turning now to the relationship between UK and US interest rates, I feel that I must first dispel your belief that UK rates almost by default must be above US rates, this is simply not the case. Differing economic conditions in the UK and US over recent years may have resulted in this situation, but it is not a rule nor is it any kind of economic plan. What is important to understand is that interest rates will reflect the prevailing economic conditions of the various countries economies. However, if the majority of factors suggest that UK inflation might fall in the medium term, then, to answer your question, it would be perfectly possible for UK interest rates to be reduced even if the US rates are on the way up. If, as you suggest, FED rates do reach 4.50% and the dollar strengthens then as you say, all things being equal, UK imports denominated in dollars will become more expensive which in turn may put upward pressure on inflation and hence interest rates. However, this would just be one of many factors potentially affecting inflation that are considered by the MPC. Including the fact that if the dollar strengthens, UK exports to the US would become more competitive benefiting the economy. With respect to the timing of interest rate changes, the MPC look at the latest data and economic forecasts afresh each month and make their decision accordingly. So if inflation expectations are such that an interest rate change is required they will make the change that month, they do not attempt to make pre-emptive changes. More generally, I hope you can understand what we are trying to achieve. It is the 'boom and bust' scenarios that we are trying to avoid by keeping inflation low. We firmly believe that it is vital to work towards low inflation and a stable economy which in the longer term will benefit everyone. Thank you once again for taking the time to write to the Bank. I hope that I have been of assistance to you. Further information including the minutes of MPC meetings are available from our website at www.bankofengland.co.uk . Yours sincerely Quote Link to comment Share on other sites More sharing options...
Guest Charlie The Tramp Posted December 13, 2005 Share Posted December 13, 2005 If, as you suggest, FED rates do reach 4.50% and the dollar strengthens then asyou say, all things being equal, UK imports denominated in dollars will become more expensive which in turn may put upward pressure on inflation and hence interest rates. However, this would just be one of many factors potentially affecting inflation that are considered by the MPC. Including the fact that if the dollar strengthens, UK exports to the US would become more competitive benefiting the economy. They could be saying yes in a roundabout way to your enquiry. Quote Link to comment Share on other sites More sharing options...
bubbleturbo Posted December 14, 2005 Share Posted December 14, 2005 The US Media analysis is that rate hikes are over - see the video on the marketwatch link of the OP. But the FT analysis seems to disagree and thinks that although they are going into another phase, there are still a couple or a few hikes left to go. http://news.ft.com/cms/s/6b382130-6beb-11d...00779e2340.html Quote Link to comment Share on other sites More sharing options...
OzzMosiz Posted December 14, 2005 Share Posted December 14, 2005 It is the 'boom and bust' scenarios that we are trying to avoid by keeping inflation low Hmmm think they may have forgot about the boom part though!!! :angry: Quote Link to comment Share on other sites More sharing options...
FTBagain Posted December 14, 2005 Share Posted December 14, 2005 Jason, Congratulations on a excellent e-mail. Very very interesting response from the Bank. Webmaster Can we have this e-mail pinned, say as a link on the Homepage. Thanks Quote Link to comment Share on other sites More sharing options...
Mushroom Posted December 14, 2005 Share Posted December 14, 2005 I doubt that, in an email reply, the BOE is going to suggest, in any way, that the historic relationship between the £ and $ is something they actively target. The Governor in front of the Treasury Select Committee, that might be different. Quote Link to comment Share on other sites More sharing options...
sign_of_the_times Posted December 14, 2005 Share Posted December 14, 2005 (edited) I e-mailed the bank of england about this, there reply: My e-mail: Their reply: I'm quite amazed they took the time to reply! keep this guy's name - could be handy in the future ? Edited December 14, 2005 by sign_of_the_times Quote Link to comment Share on other sites More sharing options...
libitina Posted December 14, 2005 Share Posted December 14, 2005 I'm quite amazed they took the time to reply! keep this guy's name - could be handy in the future ? Ditto Quote Link to comment Share on other sites More sharing options...
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