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Guest Bart of Darkness

Interest Rates, When Will We See A Change?

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Guest Bart of Darkness

To the surprise of practically no one, interest rates were held in January. They've been at 4.5% for a while now and I've seen speculation on here that February (or more likely March) will see some sort of change.

Now as a bear and a saver, I'd like to see rates rise, but if I was putting money on it, I'd bet on a fall (possibly to try and coax a spring bounce out of the moribund housing market). A cut wouldn't do very much financially for hard pressed borrowers but it could bolster the all important "sentiment" factor.

So are we going to see a change in interest rates fairly soon? Does anyone have their feelers out, their ear to the ground, their finger on the pulse (and quite possibly having put their back out in the process of doing all that?)

Or is it just going to be "steady as she goes" for the next few months?

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To the surprise of practically no one, interest rates were held in January. They've been at 4.5% for a while now and I've seen speculation on here that February (or more likely March) will see some sort of change.

Now as a bear and a saver, I'd like to see rates rise, but if I was putting money on it, I'd bet on a fall (possibly to try and coax a spring bounce out of the moribund housing market). A cut wouldn't do very much financially for hard pressed borrowers but it could bolster the all important "sentiment" factor.

So are we going to see a change in interest rates fairly soon? Does anyone have their feelers out, their ear to the ground, their finger on the pulse (and quite possibly having put their back out in the process of doing all that?)

Or is it just going to be "steady as she goes" for the next few months?

I'd expect no change for a while. The next challenge the MPC will face will be when last summer's big oil price increases work their way out of the YoY inflation figures, putting strong downward pressure on inflation -- but it's really too late to address that with interest rate cuts now.

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I don't see anything changing for a while.

The "Press" and "Experts" report that a CUT in rates is "likely". But I just don't believe them. I haven't managed to find any facts to back up their predictions for a cut. They are usually just cited anecdotally at the end of the reports.

I think this is just to raise confidence now (FTB's think ooooooo cuts ahead!!!), as they know the rates are going up soon.

I think rates will be higher in Dec 2006 than in Dec 2005. Steady as she goes yes - steadily UP

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I'd expect no change for a while. The next challenge the MPC will face will be when last summer's big oil price increases work their way out of the YoY inflation figures, putting strong downward pressure on inflation -- but it's really too late to address that with interest rate cuts now.

How do you know oil isn't going to rise between now and the summer? Have you seen what it's been doing today?

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Guest Bart of Darkness

I have a feeling that interest rates seem stuck where they are at the moment. Upward movement will be unpopular with a lot of people, downward movement seems more likely :( but the MPC seem to prerfer inaction at the moment.

Damned if they do and damned if they don't.

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I think down is possible but probaly not this month. Still, lowering them is just increase the pain of the inevitable - the BOE know that ir rates are well below average and will have to rise sometime - especially if the rest of the world's are. Lowering interest rates is just going to make it more painfull when they do. 4.25% -> 6.5% is a pretty painfull jump for example.

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Even if interest rates did come down, which I don't personally believe, the lenders will not necessarily pass them on to borrowers.

They must know that they have large losses ahead of them and why not take the opportunity to scr*w the saver. :(

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I'd say rates will be unchanged this month. The MPC would like to cut them but I think they will hold off until they know whather the current oil and gas price surges are going to be temporary or sustained. March is a possible date for a cut... but still not that likely imho.

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Guest Bart of Darkness

Are there any reliable (or semi-reliable) signs of a move in interest rates? Betfair is supposed to have a pretty good record according to some on this site and from looking at their odds, it's quite clear that they don't anticipate a change in February.

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Are there any reliable (or semi-reliable) signs of a move in interest rates? Betfair is supposed to have a pretty good record according to some on this site and from looking at their odds, it's quite clear that they don't anticipate a change in February.

Look here

http://www.futuresource.com/quotes/custom....us=LSS&t=Future

And for example take June 95.55. To work what the markets think rates will be then take 100 less 95.5 which gives 4.45 less 0.15 adjustment gives an implied rate in June 06 of 4.30%. This probably wont come to pass, but it could be said the markets are predicitng .2/.25 and 80% chance of a rate cut by June.

You can also here get the graphs to see how the contract moves over time.

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With earnings growth down & unemployment up, there is only one way from here and I don't think we'll be waiting too long for it either......

You may well be right, but you make the dire economic reality sound like it is actually a good thing for house prices; that seems a little strange.

Are you saying house prices will only be supported while there are these extremley low interest rates (or lower ones) and that if interest rates every rise that would be a problem? I guess you want the economy to continually get worse so interest rates can go down, down, down?

Problem for you is that a bad economy has far more impact on house prices than rising interest rates do.

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how long do u think we can hold at this level after the yanks breach parity?

Oh, sorry, I forgot. TTRTR lives in a little 'Harry Enfield' world, where the UK is the size of Africa, and dominates the globe and is thus totally impervious to economic happenings outside our sceptered isle.

I say, Cholmondley old chap. No need to raise rates is there? After all, we own the dashed globe, dontcha know? pip pip. Send a gun boat or two. That'll soon get those perishing colonials to stop raising their interest rates, wont it!

You seem to be incapable of understanding one simple fact - uncontrolled inflation is bad. If we drop our rates, we fuel it. If we don't raise our rates when everyone else is, we import it. Not exactly rocket science, is it?

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up. within 3 months

I wish. I think they will head down slightly unfortunately under Brown's 4 MPC poodles' influence. The £ has strengthened anyway against the $ so there is less need to raise IRs now to strengthen the £. Inflation effects-who knows but Brown seems expert in manipulating what gets counted for various inflation indices.

S.

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Well old buddy maybe we'll need to import some inflation if it keeps dropping & wage growth doesn't hold up.

If you think debt is going to be inflated away, why do you keep money in the UK? Clearly you think the only way for people to afford the prices for houses is for the money supply to rise and nominal house prices to stay steady. That means a real drop in house prices - so why is it again that you think they are still a good investment?

If you don't think a real fall in house prices is on the cards, then why do you think debt needs to be inflated away? 80% (there abouts, i forget the exact figure) is housing debt.

Edited by padders

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Given the levels of endebtedness of the government and the people of this country, "inflating the debt away" must seem like a very attractive option to some. I wonder, though, if the rise of the "grey vote" (which is only going to get stronger as the baby-boom generation approaches retirement) makes this politically far more difficult than it has been in the past, price inflation being generally bad for pensioners, who largely depend on fixed incomes.

Also, inflation is a double edged sword for the government - it may erode their debt, but many of its expenditures are inflation-linked (benefit payments etc etc Cynics say this is why the CPI was adopted as it systematically produces lower figures than the RPI). It would be interesting to know the relative sizes of these effects.

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How else will the debt be inflated away?

*wage* inflation erodes debt.

What happens if we don't get any decent wage inflation (probable) and all these poor poor indebted souls actually have to pay back all the debt (in real terms) they have racked up. Oh dear

:lol:

TimeToSellMyPortfolioBeforeTheBailiffsArriveToRepossessMyFirstBorn - have you thought of this scenario? (serious question...)

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If inflation does go up, expect lots and lots of protests by old people.

Also, given that there are so many countries with low inflation at the moment, expect people to move their sterling abroad. It's a *lot* easier to do so than it used to be as well now, setting up a Euro account online is not a difficult procedure so even your average Job Blogs can move their money if they want.

Inflation may be tempting approach to this, but clearly it dosen't solve the problem. When a country borrows to consume it does so because it values consumption in the present more than the future. The result of this is decreased consumption in the future unless growth is > than the borrowing from the future. With debt growth easily outpacing GDP growth the result is obvious. Inflating the currency does nothing to help this fundamental imbalance.

Edited by padders

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u r wasting your time, padders. TTRTR is so thick he still thinks that there is 'free money'

He's actually trying to INCREASE his exposure to property right now, as the market sinks sadly behind a veil of pathetic and easily disproved VI spin...

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To raise interest rates would create a stronger pound and that would absolutely hammer the UK's already pathetic exports. The trade deficit is now unserviceable and only a handout by the IMF, following a change of leadership would cure the problem.

We are all now just running on a treadmill until people have the common sense to wake up to our insolvency and declare bankruptcy to the European Central Bank and the wider world.

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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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