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Markets shift to bet on UK interest rate cuts


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Investors are betting the Bank of England will slash UK interest rates to record lows in response to the economic threat of coronavirus, after the US Federal Reserve’s emergency half-point cut earlier this week. Markets moved to fully price in a quarter-point reduction to 0.5 per cent by the BoE’s next policy meeting on March 26, while Goldman Sachs warned that the impact of the virus could tip the UK economy towards recession. Futures contracts also imply a small chance of a further cut to 0.25 per cent — equalling the all-time low for rates in the wake of the Brexit referendum in 2016. As recently as the middle of last week, even a single rate cut in March was seen as unlikely, with a probability of less than 10 per cent.



https://www.ft.com/content/79d8d9f0-5ed4-11ea-8033-fa40a0d65a98

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2 hours ago, maffo in oxford said:

I don't think it makes sense, rates are so low it is pushing on a string. 

The one trump card we have over the US is that our debt to GDP is lower. 

I'd say keep rates up, keep exports cheaper and invest in fiscal items. But no give aways to cr@p firms. 

If Sterling falls, the rise in fuel prices alone will do more damage than the savings to borrowers in interest. 

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3 hours ago, Mikhail Liebenstein said:

I don't think it makes sense, rates are so low it is pushing on a string. 

The one trump card we have over the US is that our debt to GDP is lower. 

I'd say keep rates up, keep exports cheaper and invest in fiscal items. But no give aways to cr@p firms. 

If Sterling falls, the rise in fuel prices alone will do more damage than the savings to borrowers in interest. 

If only! :( Nothing else to add...

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They had a decade to normalise the “emergency “ low rates from 2009 to 2019 and they fluffed it.

Now - inevitably - when the next real crisis hits they’ve no ammunition.

We all said so on here for a decade.

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I think the story has moved on a lot from interest rates, they are basically nothing at this point and have been for a long time.

the key now is to keep the printing presses white hot, and by doing that reduce the ‘real’ interest rate you actually pay much closer to 0% also

problem with all of this though, is it does create a value transfer mechanism from the average person to the wealthy asset owners, but there is nothing in place to allow the average person to regain wealth, it won’t be too long and the average person will be in perpetual debt, rent everything, have zero assets. 

I always think back to Black Plague and post WW2 where the powers that be either had to improve the lot of the average person, or had a very strong interest in doing so. 

the older generation has a brief period where they had a massive generation which created its own demand, AND spunked all the UK’s oil wealth on themselves in a short period of time.

for most of history the average person has not been worth all that much. and the days of learning a skilled trade (a way of creating value) is fading away also with all the advances in technology. we are getting to the point that skilled trades like plumbing etc can make good money, but they are generally feeding off the impoverished general population, so where they should be making bank, they instead are getting by. 

a it’s all about resource management, due to the availability of debt, it’s like a mechanism of getting blood from a stone, even when you don’t expect everyone to pay all of it back, you know on Ballance you can get say 5% profit out of the general populace, it’s a mechanism for misery for the average person, keeping the human cattle constantly squeezed for every last drop of value you can get.

and the super rich who actually benefit don’t even need to live in the countries where they kill any sense of society! or the social problems they create. 

 

 

Edited by jiltedjen
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The government is ready and poised to borrow big time.......how else will they do all they say they are planning to do.....the lower the cost of borrowing the better for them, but it will not make as any richer nor feel richer just more insecure about where all this will lead us.?

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How on earth can anyone think that an interest rate cut of max 0.5% will make the slightest difference to anything? It's complete madness. Central banks have cut in the region of 5% in previous recessions - which is where we're heading - but they have nowhere near this amount of slack at the moment.

Of course QE is always available and will be used but this is of limited effect and fiscal policy has its limits.

However, it wouldn't surprise me if the government didn't discover the lights of MMT, "forgetting" the potential consequences to inflation down the road.

 

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  • 415 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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