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I Told You So

Interest Rates

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I am sick to death of reading in the press that IR's are still likely to be cut. Even in light of yesterdays news on the hugely expanding service sector the tone seems to be that IR's will now not be cut for 6 to 8 months, there are even people on this site with the same view, its as if its accepted that rates are to high and will have to come down at some point.

No they are not, they are currently accommodative and way below the long term trend of 5.5% and in my view will have to revert back to the norm at some point.

Rant over.

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Economist on Bloomberg this morning was saying that Eurozone will be going up and data from the US suggests the same. I really don't see a valid reason why UK rates should come down apart from the precise objective of avoiding a crash in the housing market. That is all it comes down to. The real big headache is if they try to avoid that what will it cost? The implications could be huge and the results are far from guaranteed as seen in Japan. I think the game is up and they should accelerate the decline and face the issue instead of sacrificing the nations root economic stability (I know the HPC will effect the stability too but nothing like a collapse in currency) as the situation is now extremely volatile.

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Economist on Bloomberg this morning was saying that Eurozone will be going up and data from the US suggests the same. I really don't see a valid reason why UK rates should come down apart from the precise objective of avoiding a crash in the housing market. That is all it comes down to. The real big headache is if they try to avoid that what will it cost? The implications could be huge and the results are far from guaranteed as seen in Japan. I think the game is up and they should accelerate the decline and face the issue instead of sacrificing the nations root economic stability (I know the HPC will effect the stability too but nothing like a collapse in currency) as the situation is now extremely volatile.

They will come down so that Brown can have an easy entry to No10, courtesy of tame members of the MPC...

Edited by Scooter

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Economist on Bloomberg this morning was saying that Eurozone will be going up and data from the US suggests the same. I really don't see a valid reason why UK rates should come down apart from the precise objective of avoiding a crash in the housing market. That is all it comes down to. The real big headache is if they try to avoid that what will it cost? The implications could be huge and the results are far from guaranteed as seen in Japan. I think the game is up and they should accelerate the decline and face the issue instead of sacrificing the nations root economic stability (I know the HPC will effect the stability too but nothing like a collapse in currency) as the situation is now extremely volatile.

Even the EA themselves are against a cut!

With expectations of an interest rate cut at some time in the first quarter of the year, the National Association of Estate Agents is advising the MPC against too quick a reduction of interest rates in early 2006.

NAEA believes cuts may raise the spectre of increased inflation and endanger the current soft landing in the property market.

Peter Bolton King, chief executive of the NAEA, says: "Although first time buyers and the retail market may hope for interest rates to be brought down at the beginning of 2006, it is now more vital than ever that the Bank of England’s Monetary Policy Committee gets its timing correct."

"A hasty rate drop runs the risk of encouraging people to spend money they do not have, which could easily draw us into a period of inflation. To counteract this, interest rates would then have to be raised, which would have a serious impact on the steady growth now predicted for the housing market."

Ongoing problems for first-time buyers and the retail sector should not distract the MPC, says Peter Bolton King. "Timing a rate rise incorrectly risks sacrificing a sizeable medium to long term problem for the minor benefits of a short term gain."

The next Bank of England MPC meeting is set for Wednesday and Thursday next week. Their decision will be issued at midday Thursday.

http://www.themovechannel.com/News/2006/January/6b.asp

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With other central banks pushing rates up (EU, US, AUS to name a few) the BOE will find it very hard to buck the trend otherwise they risk an inflationary run on the pound. The BOE's remit is to target inflation, nothing else. House prices are but one small factor in their consideration of the wider picture.

The only way is up...(baby)...

IMHO

Regards

BP

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I am sick to death of reading in the press that IR's are still likely to be cut. Even in light of yesterdays news on the hugely expanding service sector the tone seems to be that IR's will now not be cut for 6 to 8 months, there are even people on this site with the same view, its as if its accepted that rates are to high and will have to come down at some point.

No they are not, they are currently accommodative and way below the long term trend of 5.5% and in my view will have to revert back to the norm at some point.

Rant over.

You seem to know something the gilt market is as yet unaware of. You may want to take (an equivavalent of) a short position in gilts to benefit from this knowledge. ( http://focus.squaregain.co.uk/en/gilts/giltlist/index.html shows that yields are below 4.5% for all maturities ).

MoD

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You seem to know something the gilt market is as yet unaware of. You may want to take (an equivavalent of) a short position in gilts to benefit from this knowledge. ( http://focus.squaregain.co.uk/en/gilts/giltlist/index.html shows that yields are below 4.5% for all maturities ).

MoD

So we have a yield inversion then? Cool! recession here we come!

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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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