Rates Higher for Longer Baby!

[Unmoderated]

3 hours ago, Locke said:

State-suppressed interest rates were like a crazy chick with big boobs for people who took out debt. She'll let you shag her any time, any way, anywhere. You think you're in love. The good times will last forever.

Then, one day, she ghosts you. You call and call, certain she'll come back. The new reality of girls who won't just do what you want is not acceptable. That spark is not there. I have to work to service my debt? I can't just get a loan for a new truck? My ex would just give me blow jobs, why can't you?

Eventually, you get used to the new normal, but the wild times you experienced will always leave you jaded.

Loving the sound of your ex mate. Shame you guys couldn't make it work. 

3 hours ago, fellow said:

"One of the world's leading economic authorities has warned the UK that borrowing should remain expensive until the rate of price rises eases further and stays there. Interest rates, which are at a post-2008-era high of 5.25%, should stay there, according to the Organisation for Economic Co-operation and Development (OECD)."

 

So the OECD are effectively saying that businesses would prefer high interest rates to high inflation, giving their approval for BOE to hold rates for as long as they want.

Pretty much everyone wants high rates compared to high inflation. Those who say otherwise either have a good financial reason or haven't read anything about the 1930s and Germany. 

3 hours ago, fellow said:

No it doesn't. It implies CPI needs to fall below 2% for several months before the BOE should consider cutting rates.

No it doesn't.

They look 2 years ahead. If the model forecasts CPI over 2% in two years time they wont cut. 

Rates are not adjusted based on today's inflation rate, they're adjusted based on the forecast. Like all forecasts it's not 100% accurate. 

[TenYearToGetMyMoneyBack]

10 hours ago, Timm said:

Well, since inflation will be close to 2% at the next report, we can expect rate cuts this summer!!!

👍🍷🍷✔️✔️✔️

Why would they cut unless inflation was undershooting 2% ? 
I think that all we can conclude is that they won't be raising rates again.

[TenYearToGetMyMoneyBack]

9 hours ago, tabliski said:

Remember that the BOE is only tasked with controlling inflation measured by the CPI. This is what they are doing. If they were looking at other measures that include housing and many other volatile essential services then inflation would be far higher. This is why people keep arguing (incorrectly) with @scottbeard

Yes ............  but

I am convinced that the majority of the public, on seeing their neighbours house sell for twice what they paid for it five years earlier, then a headline in the Daily Express saying something like "Mega Bonanza for Homeowners as Prices Rocket" isn't going to decide they can't afford to go out, buy expensive products in the shops, or order that new SUV.

 Despite the username I did have a house (in the 1980s) that more than doubled in price over three years. I had a feeling that I should be spending money on it to justify the mad gains which were actually exceeding my salary.  

[dances with sheeple]

12 hours ago, Dreamcasting said:

Interest rates at 5.25/5.5% are far too low to have much effect i'm afraid. The media however is doing a fine job in convincing people that they're high.

When US inflation continues to accelerate over the coming months, at what point do the fed act by putting rates up again? Does inflation have to get to 10% for them to act with a puny 0.25% raise? I only refer to the fed here because we all know that Bailey and gang are incapable of making their own decision. Luckily for Bailey though, he has a bunch of doves at the federal reserve.

Yes, they need base rate up above 6% to have any effect, nearer 7% would be better.

[canbuywontbuy]

15 hours ago, Debt Slaves said:

You would think Stewy would want high IR's just for his savings from his 200k per year job. Stewy also being mortgage free I can't see why he seems so desperate to convince people that IR's are going to drop ASAP.

Stewy's my hero, role model, my Ultimate Man. Always making the exact right moves at the exact right time, buying the rock bottom lows, selling at the tippy top.  Face it, this forum has been graced with an investing genius.  He even has the humility to act like he's lying through his teeth, but I see through the humble act.  No, he's literally the perfect resource accumulator.  He's the Warren Buffett of HPC forums, if only Warren were lucky enough to be Stewy.

Edited May 3 by canbuywontbuy

[Stewy]

19 minutes ago, canbuywontbuy said:

Stewy's my hero, role model, my Ultimate Man. Always making the exact right moves at the exact right time, buying the rock bottom lows

Don't be jelly bro.

I bought on the Plateau as houses are safer than cash in the bank. 

[Tony_Teacake]

1 hour ago, Stewy said:

Don't be jelly bro.

I bought on the Plateau as houses are safer than cash in the bank. 

Don't wait any longer Stewy for rates to come down. I would advise you to take on a new fixed rate mortgage very soon as we all know your cheap fix is ending in July. Also  beware of standard variable rate (SVR) mortgages. SVRs are usually three per cent to four per cent higher than fixed rates.

There is no shame with you and the other 1.6 million people this year who are coming off there cheap fixes wanting rates to come down very very soon.

[Stewy]

2 hours ago, Tony_Teacake said:

Don't wait any longer Stewy for rates to come down. I would advise you to take on a new fixed rate mortgage very soon as we all know your cheap fix is ending in July. Also  beware of standard variable rate (SVR) mortgages. SVRs are usually three per cent to four per cent higher than fixed rates.

There is no shame with you and the other 1.6 million people this year who are coming off there cheap fixes wanting rates to come down very very soon.

My extremely cheap fix is £0 at 0% 🙂

[the_duke_of_hazzard]

23 hours ago, Stewy said:

Patience...it's on its way. Tick tock... ✓

Didn't you say it would happen a few months ago, 'nailed on', 'deflation happening' etc?

[Stewy]

6 minutes ago, the_duke_of_hazzard said:

Didn't you say it would happen a few months ago, 'nailed on', 'deflation happening' etc?

BoE are stupidly behind the curve. They will have to savage rates once they realise. 

[scottbeard]

20 hours ago, tabliski said:

People can see that their wages are not going as far as they used to BUT the official inflation figures are not manipulated. They are just fundamentally flawed, particularly in a country that has allowed house prices to get out of control and imports most of its energy and food.

Exactly my point, beautifully articulated.

[The Angry Capitalist]

7 minutes ago, scottbeard said:

Exactly my point, beautifully articulated.

If that's your assumption then won't the models get changed to reflect the reality more?

I certainly won't be holding my breath because my stance is the models are perfect as far as the government or ruling class is concerned.

[scottbeard]

2 hours ago, The Angry Capitalist said:

If that's your assumption then won't the models get changed to reflect the reality more?

I certainly won't be holding my breath because my stance is the models are perfect as far as the government or ruling class is concerned.

No - as you say the inflation is target is chosen by the government, and the government has no incentive to target a different inflation index model.

Let's be clear - the CPI isn't wrong it's just a model and like with any model has limitations and assumptions.  CPI in particular is very good at comparing inflation across many different countries, because most countries in the world calculate CPI in a similar way.  But it's not a great inflation target for the UK when it doesn't include house prices, and people generally spend 1/3 or more of their income on buying a house.

Similarly, my view as above is that the substitution effect is not correct to include in an inflation index, but other people could take the view that it is correct for some purposes.

Where I take issue is people who basically post that they just think the index is "fiddled" when that is frankly insulting to those at the ONS who produce it - and the real blame should like with the Treasury who set the rules for the BoE to follow.  The real "fiddle" is targeting CPI in the first place ... the idea that the ONS massage spreadsheets to round it down a bit is pretty silly when you realise that the decision to use CPI as opposed to RPI (say) over the last 30 years probably equates to around a 30% difference in total inflation.  And that is transparent a policy decision by government, not fiddling the figures.

[The Angry Capitalist]

15 minutes ago, scottbeard said:

No - as you say the inflation is target is chosen by the government, and the government has no incentive to target a different inflation index model.

Let's be clear - the CPI isn't wrong it's just a model and like with any model has limitations and assumptions.  CPI in particular is very good at comparing inflation across many different countries, because most countries in the world calculate CPI in a similar way.  But it's not a great inflation target for the UK when it doesn't include house prices, and people generally spend 1/3 or more of their income on buying a house.

Similarly, my view as above is that the substitution effect is not correct to include in an inflation index, but other people could take the view that it is correct for some purposes.

Where I take issue is people who basically post that they just think the index is "fiddled" when that is frankly insulting to those at the ONS who produce it - and the real blame should like with the Treasury who set the rules for the BoE to follow.  The real "fiddle" is targeting CPI in the first place ... the idea that the ONS massage spreadsheets to round it down a bit is pretty silly when you realise that the decision to use CPI as opposed to RPI (say) over the last 30 years probably equates to around a 30% difference in total inflation.  And that is transparent a policy decision by government, not fiddling the figures.

Agree with the statement that the index is not fiddled. The CPI isn't wrong as you point out but is severely flawed and by design in my opinion.

However, the weighting of insurance, energy costs such as electricity, gas and diesel/petrol should be changed significantly to name a few.

Product shrinkage and ingredients change should also be calculated.

They could choose a basket of products for shrinkfaltion for more simplicity.

For example, in the shrinkfaltion category include standard size changes in major branded products of butter, bacon, sausages, cooking oil, rice, pasta, tea, coffee & chocolate.

You would only need to have perhaps 10 items of major branded items in the shrinkflation calculation and then have a certain percentage weighting in the index.

There is also tax to consider too since they are expenses so if tax goes up it should be included in the index. Council tax is another.

With those changes we would see a vast difference in the results and it would be much higher than the current 3% + we are getting that's for sure.

[scottbeard]

5 minutes ago, The Angry Capitalist said:

Agree with the statement that the index is not fiddled. The CPI isn't wrong as you point out but is severely flawed and by design in my opinion.

However, the weighting of insurance, energy costs such as electricity, gas and diesel/petrol should be changed significantly to name a few.

Product shrinkage and ingredients change should also be calculated.

They could choose a basket of products for shrinkfaltion for more simplicity.

For example, in the shrinkfaltion category include standard size changes in major branded products of butter, bacon, sausages, cooking oil, rice, pasta, tea, coffee & chocolate.

You would only need to have perhaps 10 items of major branded items in the shrinkflation calculation and then have a certain percentage weighting in the index.

There is also tax to consider too since they are expenses so if tax goes up it should be included in the index. Council tax is another.

With those changes we would see a vast difference in the results and it would be much higher than the current 3% + we are getting that's for sure.

They do take account of shrinkflation in some areas - it's called hedonics and I can't remember which items they apply it to (it's not all of them) but it's almost impossible to account for quality accurately, especially in food where the manufacturer might switch to a cheaper input, but does it taste better or worse or the same?  That's subjective.

It also works (or rather is missed) both ways - for example, newspapers used to be in black and white only but are now in colour.  The product has improved but that isn't captured either.

[staintunerider]

https://wolfstreet.com/2024/04/30/the-most-splendid-housing-bubbles-in-america-amid-the-now-fizzled-rate-cut-mania-erstwhile-plunge-in-mortgage-rates/

 

[staintunerider]

Just now, staintunerider said:

https://wolfstreet.com/2024/04/30/the-most-splendid-housing-bubbles-in-america-amid-the-now-fizzled-rate-cut-mania-erstwhile-plunge-in-mortgage-rates/

 

7.5%

[morty]

Can you even get 5.25% from an easy access savings account?  

[Stewy]

17 hours ago, scottbeard said:

They do take account of shrinkflation in some areas - it's called hedonics and I can't remember which items they apply it to (it's not all of them) but it's almost impossible to account for quality accurately, especially in food where the manufacturer might switch to a cheaper input, but does it taste better or worse or the same?  That's subjective.

It also works (or rather is missed) both ways - for example, newspapers used to be in black and white only but are now in colour.  The product has improved but that isn't captured either.

@The Angry Capitalist is as Fool as he doesn't realise products are measured per gram for inflation indices.

He trots out the same stupid shrinkflation line repeatedly, and repeatedly gets corrected, but As Fool never learns. 

As thick as two short planks...