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Services Growth 'could Prompt Interest Rate Hike'

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Guest consa

Just in time for the Spring Bounce :lol:

Strong growth in the service sector has led to speculation from economists that the Bank of England’s next move could be to raise the cost of borrowing.

Mortgage holders and manufacturers hoping for a cut in interest rates were recently given hope by the City, where it had been suggested that such a move was likely as early as next month.

But data released today, which is closely monitored by the Bank's interest rate setting committee, is likely to provovoke a more hawkish stance, analysts said today.

According to the monthly CIPS survey, the service sector improved well above expectations in December with the purchasing managers index surging to 57.9 from 55.8 in November, its highest level since April 2004 and well above the much more modest improvement to 56.0 that analysts had been expecting.

http://business.timesonline.co.uk/article/...1971425,00.html

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Good post. I noticed today that IR futures are reversing their trend, making IR rises more likely. They're suggusting > Mar 2006.

I would agree despite this news, I think this is only the beginning of a turn around towards the idea of raising interest rates, so I don't think there will be any change in January.

Still nice to know that the turn around in BoE thinking may be beginning.

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From the MPC minutes released a couple of weeks ago:

'For some members, no change was also justified as the stance of monetary policy was currently mildly accomodative ...'

Accomodative, as indeed it has been for too long. The CIPS survey can help bring it back to the neutral position we had before the external members got the quarter drop in August.

HPC seemed to be moving along quite nicely at 4.75%, the move to 4.5% changed sentiment and expectations for some resulting in the bullish stats and stories reported by mainstream indices and media over the last quarter.

Sooner Merv gets his way the better

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About time someone else spotted the biggest news of the day by far.

I tryed to post it this morning but wasnt 'VIP' although it now seems I can after a few moans.

Anyway less about me, this is major. SIPPS and now rising IR's.

Come on you IR cut merchants what you saying now :lol::lol::lol::lol::lol::lol::lol:

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IMO it has very little to do with domestic issues, they are just an excuse. US, EU, AUS plus other developed nations are all trending up with their interest rates. It would be suicide for the BOE to do anything else.

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If a lot of people buy into this house debt is a good thing and increase the prices then what can the BoE do? Retail may be suffering but cutting rates it unlikely to help them it would only stoke the HPI even further it seems. Raising rates which eventually effect everything!

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Sorry consa, although I accept that if rates rise there would be an immediate psychological impact to the market as well as to consumer spending.

However

1) There is in my opinion a delay between any interest rate move and its effect on both disposable income and the housing market. Therefore a rise in rates now or even in March would have very little effect for the spring bounce.

2) If we argue that confidence and credit availablity are the key drivers of the housing market, they could cut rates and prices will still fall, since the UK public are maxed out and either unable or unwilling to take on more debt.

I don't believe raising rates will have an immediate effect. (Except to save some more nervous would be buyers from negative equity).

The lemmings will still lie to buy and the stalemate continues.

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Guest consa
Sorry consa, although I accept that if rates rise there would be an immediate psychological impact to the market as well as to consumer spending.

I think consumer spending is a one way ticket now whatever happens, rates up or down

However

1) There is in my opinion a delay between any interest rate move and its effect on both disposable income and the housing market. Therefore a rise in rates now or even in March would have very little effect for the spring bounce.

This is true, there is a time lag and I don't believe a hike in interest rates will matter too much either way, it is more of a sentiment thing

2) If we argue that confidence and credit availablity are the key drivers of the housing market, they could cut rates and prices will still fall, since the UK public are maxed out and either unable or unwilling to take on more debt.

Not necessarily confidence and credit availability although this helps no doubt, I would opt for greed and speculation and also peer pressures

The sheeple are driven by sentiment swings at this point in the cycle hence the VI onslaught, the VI's know their livelyhoods depend on sheeple to keep buying and a cut in rates is a lot better for them than any of their spin can ever achieve, a rise in rates would take the froth off the spin for a while at least.

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Damn! It all looks too inflationary to me...

I want a bigger bubble and I want it now! :D

I am fascinated to see what would happen to the global currency and exchange rates if the amaericans do overtake us..

but they will do that if we stand still..

I want higher IR's.. but I am intrigued as to what would happen if we don't get them..

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Wouldn't a hike in IRs immediately impact those with CC and personal debts? Surely the CC companies would pass on the rises (and some) within a fortnight?

Should that occur, wouldn't the thirst for overpriced properties, suffer a severe case of the dreaded brewer's droop?

I think you'll find they dont wait around for BoE decisions , CC co's are already raising rates effectively by cutting 0% deals and other promotions , plus you'll notice most are now charging fees for transfers.

Others have just raised rates.

Dames

Edited for a mispell :0)

Edited by Dames

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QUOTE(Being_Patient @ Jan 5 2006, 05:12 PM)

IMO it has very little to do with domestic issues, they are just an excuse. US, EU, AUS plus other developed nations are all trending up with their interest rates. It would be suicide for the BOE to do anything else.

Couldn't agree more. It's all about BW II i.e. it's a global matter. Those that believe that UK plc can just plough ahead regardless of globalizing factors need to do more research before they ruin the rest of their lives on UK property at current extreme price levels...

I agree totally.

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I no longer believe this gumph about the BOE controlling interest rates.

The reports in the press are just there to assuage the muppet public.

Interest rates are set by the market, and the BOE toe the line.

The best a central bank can do is adjust the short end of the interest rate curve, and hope the market concurs.

It's been shown many times before that a central bank can't oppose the market.

They're just not big enough.

It's only a matter of time before we have to raise rates or tempt a currency crisis.

Or both.

Edited by BandWagon

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In a logical and rational world yes this would be a good reason to get the interest rates up and get us more in line with the international community who are raising their rates to quell inflation.

However... I'm sure Crash Gordon has made his demands quite clear to his agents on the Boe MPC- keep the sheeple spending at any cost (literally) or else his "miracle" economy goes bang. So does his shot at being PM for any length of time.

I just cannot see any other move but down for now. Would love them to go up and get this crash underway but I don't believe GB will let that happen :( .

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I no longer believe this gumph about the BOE controlling interest rates.

The reports in the press are just there to assuage the muppet public.

Interest rates are set by the market, and the BOE toe the line.

The best a central bank can do is adjust the short end of the interest rate curve, and hope the market concurs.

It's been shown many times before that a central bank can't oppose the market.

They're just not big enough.

It's only a matter of time before we have to raise rates or tempt a currency crisis.

Or both.

too right, dr bubb.

when the borrowing stops it stops. at this stage the banks will have to charge their existing debtors more to keep their profits yoy equal and cover bad debts. the service industry has already seen it's customer supply fall off and is now increasing prices to keep it's profits stable and shareholders happy, thus adding to inflation. it has always been so and isn't different now....

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too right, dr bubb.

when the borrowing stops it stops. at this stage the banks will have to charge their existing debtors more to keep their profits yoy equal and cover bad debts. the service industry has already seen it's customer supply fall off and is now increasing prices to keep it's profits stable and shareholders happy, thus adding to inflation. it has always been so and isn't different now....

I'm not DrBubb.

He's older, wiser, and richer...

Edited by BandWagon

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Looking at the money markets we could be in for a raise quite soon, i.e. within the next 3 months; quite a turn around from where we were only a couple of months ago.

I can't wait for the minutes of the next BoE meeting. Things are definitely not as clear cut as last month. We could see a couple of members opting for a raise.

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The .25% drop last year was a mistake. The BOE wise men realised this shortly after. However having dropped rates when inappropriate, to increase them will mean publicly admitting they were wrong. There will also be political pressure for another reduction over the next 3 months as the VI feel the squeeze. What is probably needed is another .25% increase in April or May. What we dont need (for the greater good of the country) is another reduction for at least 6 to 8 months. What we will probably get is no change for at least 6 months, as that will be the easiest one to justify.

This is JMO and should not be construde as Investment advice.

Pablo Silver or Lead.

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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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