THE FED: 0.75% RATE RISE THIS WEEK?

[BaldED]

The markets have budgeted for 75 but there is now talk of an aggressive 100. 

[reddog]

1 hour ago, BaldED said:

The markets have budgeted for 75 but there is now talk of an aggressive 100. 

Holey f, that would put the cat amongst the pigeons!!  

 

It would probably work out for the US though (not so much the rest of the world!!)

[henry the king]

1 minute ago, reddog said:

Holey f, that would put the cat amongst the pigeons!!  

 

It would probably work out for the US though (not so much the rest of the world!!)

Bailey would be in a bit of a pickle wouldn't he. Would be funny him trying to justify actions which cause the £ to collapse. 

I could see a inter-meeting rise in July is Bailey bottles it on Thursday whilst the Fed are going 0.75%+.

Rumours the Fed will do inter-meeting rises too. 

[msi]

1 hour ago, BaldED said:

The markets have budgeted for 75 but there is now talk of an aggressive 100. 

100 would trigger capital flight from GBP

[TheCountOfNowhere]

5 minutes ago, msi said:

100 would trigger capital flight from GBP

the boe would need to respond

[reddog]

So the Fed meeting is tomorrow, do we get the decision the same day?

[Timm]

1 hour ago, henry the king said:

Bailey would be in a bit of a pickle wouldn't he. Would be funny him trying to justify actions which cause the £ to collapse. 

I could see a inter-meeting rise in July is Bailey bottles it on Thursday whilst the Fed are going 0.75%+.

Rumours the Fed will do inter-meeting rises too. 

Hmm. I'm not sure.

It would certainly make 0.5% a bit of a given, and give him an out if it turns out they went too hard too fast. Yields on 10y Gilts are about 1/3 below 10y Treasuries, so I don't think he would need to go above that (in terms of relative credibility). 

Anyway, I still don't think huge jumps in the bank rate would help all that much with an inflation that is mainly driven by factors other than a rise in the credit-money supply.

[henry the king]

9 minutes ago, Timm said:

Hmm. I'm not sure.

It would certainly make 0.5% a bit of a given, and give him an out if it turns out they went too hard too fast. Yields on 10y Gilts are about 1/3 below 10y Treasuries, so I don't think he would need to go above that (in terms of relative credibility). 

Anyway, I still don't think huge jumps in the bank rate would help all that much with an inflation that is mainly driven by factors other than a rise in the credit-money supply.

The £ is already breaking below $1.20 and petrol as a result (partially as a result) is ruining the economy. 

I can see a currency war coming but this time countries try to protect their currencies. 

Bailey should just go 1% on Thursday and send a clear message that he doesn't give a ****** and he is here to deal with inflation. The £ could recover, petrol go down and we would be better off. 

You think Bailey can get away with +0.25% if the Fed go +0.75%? I think he can just about....maybe. But in August he might then have to go +0.5% to deal with the Fed moving in 0.75% leaps now.

Bailey is in big trouble right now is my conclusion. Every central bank seems to be going bigger and bigger rises. 

[Gurgle]

1 hour ago, henry the king said:

The £ is already breaking below $1.20 and petrol as a result (partially as a result) is ruining the economy. 

I can see a currency war coming but this time countries try to protect their currencies. 

Bailey should just go 1% on Thursday and send a clear message that he doesn't give a ****** and he is here to deal with inflation. The £ could recover, petrol go down and we would be better off. 

You think Bailey can get away with +0.25% if the Fed go +0.75%? I think he can just about....maybe. But in August he might then have to go +0.5% to deal with the Fed moving in 0.75% leaps now.

Bailey is in big trouble right now is my conclusion. Every central bank seems to be going bigger and bigger rises. 

If they do 0.25% when the Fed is doing 0.75% then they are making the inflation problem even worse than it already is.  100% guaranteed.  They started too late and now they're going to have to pay the piper.  Too much vigilance, not enough action.

[FivePoundLatte]

1 hour ago, reddog said:

So the Fed meeting is tomorrow, do we get the decision the same day?

I believe the meeting (FOMC?) is today and tomorrow, with the result announced 2pm tomorrow - meaning 7pm or 8pm UK time?

[henry the king]

13 minutes ago, Gurgle said:

If they do 0.25% when the Fed is doing 0.75% then they are making the inflation problem even worse than it already is.  100% guaranteed.  They started too late and now they're going to have to pay the piper.  Too much vigilance, not enough action.

Words are no longer enough to satisfy the markets.

That is why the Fed is considering larger rises. They tried the "talk tough" and it did nothing. So now it is action time. The BoE is still in denial. They still thing inflation will magically come back to 2%. They are deluded and the markets have had enough. They will demand Bailey acts.

[Dreamcasting]

Apparently there is a 90% chance of the Fed increasing rates by 0.75% tomorrow. And given the further decimation of the GBP today, i'd say the markets think the BofE won't match it and only go for 0.25%.

If the Fed does go for 0.75% tomorrow, the BofE need a full 1% increase.

Failure to act now and keep acting is going to cause devestation to millions within a few short months, probably around October/November time.

[Dreamcasting]

The BofE aren't in denial though. The MPC members are simply incompetent who know nothing about anything.

Hopefully they'll take a hint from the Fed tomorrow. If not, curtains time.

[reddog]

16 minutes ago, FivePoundLatte said:

I believe the meeting (FOMC?) is today and tomorrow, with the result announced 2pm tomorrow - meaning 7pm or 8pm UK time?

That's good, so basically the BOE and the market will know exactly what has been decided and will have to do the same.

 

It will be difficult for then to slither out of a hefty rate rise by claiming they didn't know what the US was going to do!

[Huggy]

1 minute ago, Dreamcasting said:

Apparently there is a 90% chance of the Fed increasing rates by 0.75% tomorrow. And given the further decimation of the GBP today, i'd say the markets think the BofE won't match it and only go for 0.25%.

If the Fed does go for 0.75% tomorrow, the BofE need a full 1% increase.

Failure to act now and keep acting is going to cause devestation to millions within a few short months, probably around October/November time.

I hope so. I guessed 0.5%/0.5% for the Fed/BoE decision this week in the other thread, but 0.75% does seem a nice little booster to help the HPC morale

I have never felt so positive about economic factors since 2008 as I do now. Boy am I glad I didn't buy recently

[reginekierkegaard]

2 minutes ago, henry the king said:

Words are no longer enough to satisfy the markets.

That is why the Fed is considering larger rises. They tried the "talk tough" and it did nothing. So now it is action time. The BoE is still in denial. They still thing inflation will magically come back to 2%. They are deluded and the markets have had enough. They will demand Bailey acts.

US has a stronger economy than the UK. While US may be able to tolerate an interest rate hike at 100 basis point, UK would be tipped into recession if they do the same.
Households are tightening their belt. Disposable income is being squeezed. Consumer confidence is at all time low. While UK is just about to start a trade war with the third largest economy in the world, we will struggle to export. A weaker pound, ironically would favour exportation of goods and services. 
 

[Huggy]

9 minutes ago, reginekierkegaard said:

Households are tightening their belt. Disposable income is being squeezed. Consumer confidence is at all time low. While UK is just about to start a trade war with the third largest economy in the world, we will struggle to export. A weaker pound, ironically would favour exportation of goods and services. 

Oh no, it sounds really bad nowadays. Might make house prices improve a bit though

[PalmerEldritch]

1 hour ago, Huggy said:

I hope so. I guessed 0.5%/0.5% for the Fed/BoE decision this week in the other thread, but 0.75% does seem a nice little booster to help the HPC morale

I have never felt so positive about economic factors since 2008 as I do now. Boy am I glad I didn't buy recently

GBP:USD down to 1.2 today.

If the BOE don’t do 0.5% then surely that can only get worse considering the FED position.

Makes imported inflation even worse no?

Mortgage rates might well double by year end if this all plays out. HPC will then be locked and loaded for 2023/2024.

[Dreamcasting]

Economy size doesn't dictate the ability to set higher interest rates.

Imported inflation is very significant in the UK. Interest rates really do need to increase substantially at this point. No point in trying to save financial illiterates with unserviceable mortgages.

 

[Social Justice League]

Debtors are going to be left holding the bag imo.

This is the way it should always end.  The feckless need to pay for being idiots, otherwise it's collapse.

[reddog]

6 minutes ago, Social Justice League said:

Debtors are going to be left holding the bag imo.

This is the way it should always end.  The feckless need to pay for being idiots, otherwise it's collapse.

Let's hope so, but debtors have had a pretty good run since the 90s.

 

I curse the fact that I a sensible!!

[Flat Bear]

15 hours ago, Timm said:

I'll do my best!

To be clear, I am not saying that inflation is a paper tiger. What I am saying is that the BOE risks raising interest rates into the face of a recession. You might think that is a good thing (or at least a necessary evil), but that does not falsify my contention that the BOE might raise into a recession.. 

The world is a complicated place and that there is a risk that central banks will use interest rates to try and combat an inflation that is not just caused by an increase in the supply of credit money.

No, it was wrong. But I think an element of it might be true.

I would not be surprised to see CPI in double figures, maybe even 15%, but I don't see it spiralling beyond that. As yet, I don't see an inflationary spiral - wage increases for example are high, but well below the rate of inflation.

I should not have used an exact figure. But yes, I think there has been a supply side shock, which may get worse but is unlikely to spiral (to some extent, we will substitute for Ukrainian sunflower oil and wheat and Russian timber etc). In a years time, many of those price increases will be baked in, but will drop out of the CPI figure.

To repeat myself, I see high(er) inflation, but I don't see any signs of a hyperinflationary spiral. In fact, state money printing seems to have stopped (perhaps it will return, but that is an unknown).

Yes of course. But the supply of new money is much less than it was a year ago or two years ago.

The higher prices won't just go away, but I think the supply of new money will be less in a year than it was a year ago.

I think you are probably right. That will have an impact that will be spread over a number of years, possibly decades. It's what I was getting at when I mentioned that an unwinding of globalisation is part of the reason for higher prices. But raising the BOE bank rate won't change China to any meaningful extent.

I think we are close to peak oil - not because we are running out, but because alternatives are getting cheaper and are cleaner. Meanwhile, the poor will continue to use hydrocarbons at increasing cost.

Yes, but unless QE is restarted, it's effect will be somewhat transitory. (I suspect QE funds have a higher multiple than wider credit money, but that is just a guess).

Yes, I agree. Raising the BOE rate will do little to reduce that!

I'd just like to repeat that you are addressing the secondary point of my post. Hopefully I have addressed that to some extent - high inflation might not be going away, but a lot of the inputs are either already baked in, or will not be affected by the BOE. Raising the bank rate into a recession may however reduce the price of some assets. 

Push the hole in the tube into the expelled toothpaste, then reduce the air pressure around the body of the tube. You may find a bell jar useful, but don't overdo it, or the tube will burst!

Thanks for the reply Timm

I don't agree with much of your arguments but that's what we are here for and it is good to have differing views.

Yes of course. But the supply of new money is much less than it was a year ago or two years ago.

I am finding I am being bombarded with offers of loans both for my business and personally. Are you not getting the same? Are other posters being pestered about loans and finance? Especially interested if you run a business as I believe the latest target is businesses.

I had 2 today. The one via post I am reading and is from Funding Circle who regularly sent letters mainly, forget if they send emails.

Safegaurd your cash flow with fixed rates for up to 6 years. Affordable loans from £10,000 to £500,000. The check, I was offered up to £2,000,000 earlier. Rates from 3.9% per year? Does this sound very high? I am sure I have been offered less than 2% quite regularly, infact I was offered a free one not that long ago.

It is hard to understand where all this money is coming from. There is just so much limitless money around.

As I am typing this I have thought about looking at the number of advertisements about and how many for finance especially for business. Think there are ads on this site?

Just noticed first ad below Mortgages For Over 60s I will give the rest of this site a quick browse.

[henry the king]

4 hours ago, Flat Bear said:

Thanks for the reply Timm

I don't agree with much of your arguments but that's what we are here for and it is good to have differing views.

Yes of course. But the supply of new money is much less than it was a year ago or two years ago.

I am finding I am being bombarded with offers of loans both for my business and personally. Are you not getting the same? Are other posters being pestered about loans and finance? Especially interested if you run a business as I believe the latest target is businesses.

I had 2 today. The one via post I am reading and is from Funding Circle who regularly sent letters mainly, forget if they send emails.

Safegaurd your cash flow with fixed rates for up to 6 years. Affordable loans from £10,000 to £500,000. The check, I was offered up to £2,000,000 earlier. Rates from 3.9% per year? Does this sound very high? I am sure I have been offered less than 2% quite regularly, infact I was offered a free one not that long ago.

It is hard to understand where all this money is coming from. There is just so much limitless money around.

As I am typing this I have thought about looking at the number of advertisements about and how many for finance especially for business. Think there are ads on this site?

Just noticed first ad below Mortgages For Over 60s I will give the rest of this site a quick browse.

The money is coming from the central banks QE basically I think. It is still out there. The Fed's QT starts slowly today. Will take a few months to ramp up. Only then we will see money really get harder to get.

That is why mortgage rates, whilst rising, are still very low. And that is why HPI is still going strong even if it is slowing. With QT (and rising rates globally) I would like to think we'll see 4% rates on new fixed rate mortgages within a few months, up from 1% a few months ago and 2.8% or so now. 

Crazy to think the speed of this change. Only a few months ago fixed rate mortgages were easily at 1%. Now they are generally 3%. And it was only about 8-9 months ago that central banks were saying they would keep rates at near-zero through the end of 2023. And now we are mid-2022 and talking about 2-3% rates by year end.

The fact we are at 1.25% by Thursday (probably) is honestly remarkable. 

Edited June 15, 2022 by henry the king

[Timm]

4 hours ago, Flat Bear said:

Thanks for the reply Timm

I don't agree with much of your arguments but that's what we are here for and it is good to have differing views.

Well, I agree with that!

4 hours ago, Flat Bear said:

Yes of course. But the supply of new money is much less than it was a year ago or two years ago.

I am finding I am being bombarded with offers of loans both for my business and personally. Are you not getting the same? Are other posters being pestered about loans and finance? Especially interested if you run a business as I believe the latest target is businesses.

I do not run a business. I would say that postal offers have reduced, whilst email offers have stopped.

4 hours ago, Flat Bear said:

I had 2 today. The one via post I am reading and is from Funding Circle who regularly sent letters mainly, forget if they send emails.

Safegaurd your cash flow with fixed rates for up to 6 years. Affordable loans from £10,000 to £500,000. The check, I was offered up to £2,000,000 earlier. Rates from 3.9% per year? Does this sound very high? I am sure I have been offered less than 2% quite regularly, infact I was offered a free one not that long ago.

I think this illustrates that lenders are wanting to advance smaller loans at higher rates.

The fact they are bombarding you and not me seems to indicate that they are also chasing quality.

4 hours ago, Flat Bear said:

It is hard to understand where all this money is coming from. There is just so much limitless money around.

On the basis of the above, I would posit that lenders are desperate to advance smaller sums at higher rates to people who are highly likely to remain solvent (or where they can secure on assets).

4 hours ago, Flat Bear said:

As I am typing this I have thought about looking at the number of advertisements about and how many for finance especially for business. Think there are ads on this site?

Just noticed first ad below Mortgages For Over 60s I will give the rest of this site a quick browse.

Equity release will often look for a first charge on the house - very secure!

[2buyornot2buy]

5 hours ago, Flat Bear said:

Thanks for the reply Timm

I don't agree with much of your arguments but that's what we are here for and it is good to have differing views.

Yes of course. But the supply of new money is much less than it was a year ago or two years ago.

I am finding I am being bombarded with offers of loans both for my business and personally. Are you not getting the same? Are other posters being pestered about loans and finance? Especially interested if you run a business as I believe the latest target is businesses.

I had 2 today. The one via post I am reading and is from Funding Circle who regularly sent letters mainly, forget if they send emails.

Safegaurd your cash flow with fixed rates for up to 6 years. Affordable loans from £10,000 to £500,000. The check, I was offered up to £2,000,000 earlier. Rates from 3.9% per year? Does this sound very high? I am sure I have been offered less than 2% quite regularly, infact I was offered a free one not that long ago.

It is hard to understand where all this money is coming from. There is just so much limitless money around.

As I am typing this I have thought about looking at the number of advertisements about and how many for finance especially for business. Think there are ads on this site?

Just noticed first ad below Mortgages For Over 60s I will give the rest of this site a quick browse.

You won't get those headline rates for business lending at the moment. They are a hook to pull you in. Funding circle have always been "aggressive" with their marketing. You'll realistically be paying closer to 10% than 4%. I own a business, with a small fleet of 9 vans ans lorries constantly getting replaced, HP rates have increased substantially over the last 24 months. 

Find me the 2% business lending one please. 

Edited June 15, 2022 by 2buyornot2buy